Security concerns derail 3Com deal

US-based 3Com unable to convince committee that deal with Chinese counterpart won’t have national security implications

Written by Doug Woodburn

CRN, 21 Feb 2008

US security concerns have scuppered networking vendor 3Com’s plans to sell up to Chinese manufacturer Huawei and private equity firm Bain Capital.

The trio announced yesterday that they have withdrawn their joint filing to the US Committee on Foreign Investment (CFIUS) concerning the proposed $2.2bn (£1.1bn) transaction.

The CFIUS, which is led by the US Treasury Secretary, reviews corporate acquisitions by foreign buyers. It appears that 3Com was unable to ease concerns over its TippingPoint intrusion prevention unit, whose customers include the US government.

The deal would have seen Huawei take a 16.5 per cent stake in 3Com, with Bain taking the remainder. The three firms said they remain committed to continuing discussions.

Edgar Masri, chief executive 3Com, said in a statement: “We are very disappointed that we were unable to reach a mitigation agreement with CFIUS for this transaction.

"While we work closely with Bain Capital Partners and Huawei to construct alternatives that would address CFIUS' concerns, we will continue to execute our strategy to build a global networking leader.”