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US blocks Huawei bid for 3Com

A planned buyout of US technology firm 3Com Corp by a private equity firm and China's Huawei Technologies Co (華為) was formally ended on Thursday because of US government opposition, the investor firm said.

Bain Capital Partners LLC said it advised 3Com it was ending the plan because "the US government's Committee on Foreign Investment in the United States [CFIUS] said it intended to take action to prohibit that transaction."

The announcement formally ended a takeover plan that had been in trouble at the secretive CFIUS, which reviews takeovers that could affect national security.

Last month, China urged the US to deal with its companies fairly on the transaction after news of opposition on national security grounds.

The Chinese telecommunications company Huawei and the private equity firm had made a joint US$2.2 billion takeover bid for the US technology group.

After an initial snag was reported, all three sides vowed to restructure the deal in the hopes that an agreement acceptable to the committee could eventually be worked out.

"Bain Capital made several alternative proposals to 3Com that we believe could have satisfied the concerns raised by CFIUS," the firm said in a statement. "We regret that we were unable to agree upon an alternative transaction."

After the deal was announced last year, 3Com stated that Huawei "will not have any access to sensitive US-origin technology or US government sales" as a minority stakeholder.

The company said it maintains strict controls to prevent unauthorized transfers of sensitive technology.

The news from Bain came a day ahead of a shareholder meeting by 3Com to vote on the deal.

"The company intends to convene the shareholders' meeting in order to fulfill its commitments under the merger agreement, which include holding a shareholders' meeting, and to preserve its rights under the merger agreement, including its right to pursue a break-up fee under certain circumstances," a 3Com statement said. "The 3Com Board of Directors continues to recommend that 3Com shareholders vote in favor of the proposal to adopt the merger agreement."

Some US lawmakers had protested the plan, arguing that it could allow sensitive technology to be transferred to China.

Although 3Com is a relatively small player in the sector, it does business with the US government. According to the Wall Street Journal, 3Com provides network security to the Department of Defense, which has been targeted by hackers believed to be from China.
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