Tags:3Com

3Com said Wednesday that it was still unable to reach a new deal with its proposed buyers, Bain Capital and China¨s Huawei Technologies after its original $2.2 billion sale failed to receive national security approval.

The network technology company said that it will still hold a shareholder meeting on Friday to vote on the original deal, which Bain, a private equity firm, and Huawei, one of 3Com¨s biggest customers, have said they do not intend to close.

3Com¨s announcement sent its stock price plunging more than 22 percent Wednesday to $2.22, its lowest level in years.

Last month, 3Com and its proposed buyers withdrew their original deal from consideration by the Committee on Foreign Investment in the United States, an umbrella group of federal agencies that was examining national security risks in the proposal.

By that point, the death of another private equity deal had lost its novelty. A growing number of proposed buyouts, including those of student lender Sallie Mae, audio speakers maker Harman International and credit card processor Alliance Data Systems, collapsed for a variety of reasons.

But the failure of 3Com¨s takeover stood out because of the involvement of Cfius, the same agency that was criticized for its role in the proposed takeover of several American ports by a Dubai-based company in 2006.

At the heart of the 3Com matter is the military technology that 3Com makes, especially antihacking software produced by its TippingPoint unit. Defense officials and lawmakers were concerned that Huawei, which was to own 16.5 percent of 3Com, could alter technology sold to the U.S. military.

It was only after months of efforts to win approval from Cfius, including a proposal to sell off TippingPoint, that 3Com and its buyers withdrew the original deal from consideration, effectively killing it.

The parties have insisted since that they would try to reach an alternative agreement that would satisfy Cfius¨ concerns. But Wednesday¨s announcement cast doubt on the chances of success in that effort.

Nevertheless, 3Com will still hold a shareholder meeting on Friday to vote on the original sale. By doing so, the company could preserve an opportunity to seek compensation from Bain and Huawei.

＾While we remain committed to exploring alternatives that would enable us to complete the merger transaction contemplated by our existing merger agreement, we also remain confident in our long-term prospects￣ 3Com¨s president and chief executive, Edgar Masri, said in a statement.



Source:dealbook