3Com Withdraws Buyout Application
3Com Corp. on Wednesday said it could not come to an agreement with federal authorities reviewing the national security implications of a proposed buyout by a private-equity firm and Chinese telecommunications company.
3Com, a network equipment maker, said it withdrew its application to the Committee on Foreign Investment in the United States but would continue discussing a possible deal.
Marlborough, Mass.-based 3Com in September agreed to an offer of $2.2 billion, or $5.30 per share, from Bain Capital Partners and Huawei Technologies, which has strong ties to the Chinese government.
"We are very disappointed that we were unable to reach a mitigation agreement with CFIUS for this transaction," Edgar Masri, president and chief executive of 3Com, said in a
release.
The pending buyout set off alarm bells in Washington where lawmakers and the administration have expressed concerns that sensitive military technology could be transferred to China through a 16.5 percent stake held by Huawei.
"As the companies move forward, CFIUS will continue to monitor and engage appropriately based on the circumstances," said Rob Saliterman, a Treasury Department spokesman.
Shares of 3Com soared from $3.22 a share to $5.11 apiece in the weeks following Boston-based Bain's offer. Since then it has slid and ended trading Tuesday at $3.73 a share.
CFIUS is a 12-agency group with the authority to recommend the White House block or alter terms of deals that involve national security. In most transactions involving foreign-based investors, there are informal negotiations with CFIUS before it begins a 30-day review. CFIUS can decide to investigate for an additional 45 days and file a report to the president, who has 15 days to act on recommendations. The 45-day investigations are required for state-owned companies. |
