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February 23, 2008 11:30 AM PST
3Com bid died due to 'complexity,' Huawei says
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3Com sold? You're joking, right?
September 28, 2007
Huawei Technologies--China's top telecom equipment maker--and private equity firm Bain Capital pulled their proposal to buy network gear maker 3Com this week after failing to win approval from the Committee on Foreign Investment in the United States (CFIUS), a panel led by the U.S. Treasury Secretary that reviews corporate deals with foreign buyers.
"Due to the complexity of the acquisition process, the increase in acquisition costs, and the significant change in stock market conditions since last year, Bain Capital and Huawei have announced their intention to withdraw their application relating to the proposed acquisition," Huawei said in a statement Saturday.
The statement only alluded to the U.S. political concerns that are widely cited as reasons for the deal's failure.
Bain agreed in September to buy 3Com in a deal that would also give Huawei a 16.5 percent minority stake. Huawei could increase its stake in 3Com by up to an additional 5 percent.
Under Bain's proposal, China's top telecom equipment maker would not have had operational control of 3Com or access to sensitive U.S. technology. 3Com previously said Huawei would lack operational control or the ability to make decisions for the company.
But several U.S. lawmakers complained the deal threatened national security due to Huawei's alleged ties to the Chinese military.
"It's not a huge blow (to Huawei). It was a small acquisition, but it's symbolic as it shown signs of U.S. protectionism," Duncan Clark, chairman of research house BDA said Saturday.
"The U.S. may regret doing this," Clark added. "Right now, the U.S. is still feeling the pain of the sub-prime issue; they should look to attract investment, not to deter them. And 3Com may have difficulties finding new investors."
The same U.S. national security concerns could erase an already short list of foreign suitors for Motorola's handset business. Analysts have said Motorola could attract an offer from China's Huawei or ZTE.
Story Copyright © 2008 Reuters Limited. All rights reserved.
