Wednesday, February 20, 2008

3Com, Bain call off $2B deal, for now

Networking equipment maker 3Com Corp., along with its Chinese affiliate Huawei Technologies, and potential acquirer Bain Capital Partners LLC have withdrawn their joint filing to the Committee on Foreign Investment in the United States (CFIUS) concerning Bain's proposed $2.2 billion acquisition.

While 3Com president and CEO Edgar Masri called the move "disappointing," the companies remain committed to continuing discussions, according to 3Com (Nasdaq: COMS), based in Marlborough.

Specific reasons for the withdrawal were not provided, but in a statement, Masri said the parties were "unable to reach a mitigation agreement with CFIUS" for the transaction.

The all-cash transaction was originally announced in September.

One sticking point among the negotiations was the fate of Tipping Point, a division of 3Com that focuses on network security, particularly for governments, according to published reports. The merger proposal, a Bain Capital executive told the Associated Press, must contain safeguards to American national security interests.

3Com was founded in California in 1979 by a four-person team led by Ethernet inventor Robert Metcalfe. The company has a long history in networking technologies, among them the development of Ethernet and the spinout of Palm Inc. in 2000.

Metcalfe in now a general partner at Waltham's Polaris Ventures.

In 2003, the company relocated from California to Massachusetts. The same year, 3Com also established a joint partnership with Huawei. Last November, 3Com paid $882 million to buy out Huawei's 49 percent stake.

The 6,000-person company reported $1.2 billion in sales in its fiscal 2007 ending March 31, but absorbed an $88 million loss.