Bain, 3Com deal stalled on Chinese stake
Bain Capital Partners and China’s Huawei Technologies Co Ltd have withdrawn their application for U.S. security approval of a $2.2 billion purchase of 3Com Corp after failing to satisfy the concerns of a U.S. government panel.
While the companies said they were still in discussions and the proposed transaction had not yet been terminated, a source familiar with the situation said the failure kills the deal in its current form.
Shares of network equipment maker 3Com fell 23 percent, or 86 cents, to $2.87 on Nasdaq on Wednesday as the possibility of the takeover proceeding seemed remote.
The Committee on Foreign Investment in the United States (CFIUS) had raised concerns about the deal, through which Huawei — China’s top telecom equipment maker — would have initially owned as much as 16.5 percent of 3Com, whose Tipping Point unit makes national security software.
The panel, which is led by the U.S. Treasury Secretary, reviews corporate acquisitions involving foreign buyers.
Despite winning deals with top-tier carriers such as Deutsche Telekom’s T-Mobile and Vodafone, Huawei remains hampered by concerns over its founder’s connections to the Chinese military, said Duncan Clark, chairman of Beijing-based investment advisory firm BDA.
“Huawei’s challenge is that they’re just perceived as an extension of China, and China is perceived in the U.S., in this charged political environment, as somewhat of a menace or unknown threat,” he said, adding that the ending of the deal was not likely to improve trade tensions between the two countries.
Ren Zhengfei, a former People’s Liberation Army soldier, founded Huawei in 1988 credit reports. The firm has always maintained it is a private company and wholly owned by its employees.