3Com buyout collapses
FEBRUARY 20, 2008, 9:49 AM
Another private equity buyout bites the dust. 3Com (COMS) fell 20% in early trading after the struggling networking company said it and its buyers at Bain Capital had withdrawn their merger application with the Committee on Foreign Investment in the U.S., or CFIUS. The $2.2 billion deal was contingent on approval by the federal panel because Chinese networking company Huawei was a minority participant in the buyout, and because of 3Com’s computer security sales to the Defense Department. Bain’s plan to buy 3Com never looked like a sure thing: As Fortune’s Nina Easton reported back in October, some members of Congress were questioning the background of Huawei President Ren Zhengfei. In January, the panel extended its review of the deal, which meant it was no surprise when 3Com said Wednesday that it was “unable to reach a mitigation agreement with CFIUS.” Now, CEO Edgar Masri says, “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.” Obviously, given 3Com’s recent stock price of $3 a share, that strategy is hardly a surefire winner.
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