3Com Takeover in Limbo

3Com Corp. (Nasdaq: COMS) saw its share price dive by $0.73, nearly 20 percent, to $3.00 Wednesday after the Committee on Foreign Investment in the United States (CFIUS) failed to rubber stamp the vendor’s acquisition by Bain Capital and Huawei Technologies Co. Ltd. (See 3Com Deal Hits Hiatus.)

That dip has sent 3Com’s share price way lower than the price offered by Bain and Huawei of $5.30 per share.

3Com, Bain, and Huawei issued a statement noting that their joint filing to the CFIUS, which scrutinizes mergers and acquisitions that involve U.S firms and overseas companies, had been withdrawn.

"We are very disappointed that we were unable to reach a mitigation agreement with CFIUS for this transaction," noted 3Com’s CEO Edgar Masri, adding that 3Com and its bidders would work on ways to appease the committee’s concerns. National security issues have long been cited as a potential banana skin in this particular transaction, as part of 3Com’s empire, TippingPoint Technologies Inc. , sells security software to U.S. government departments: Concerns have been raised about allowing a Chinese company to own, even partially, a company engaged in such sensitive transactions. The takeover plan involved Huawei taking a 16.5 percent in 3Com, with Bain owning the remaining 83.5 percent. (See 3Com Sets Vote Date and TippingPoint Finds Vulnerability.)

This isn’t the first time Huawei has been associated with security concerns. (See Analyst: Chinese Face Spy Scandal Fallout.)

And if you think you’ve encountered the CFIUS before, then you’re probably thinking back to the 2006 monster marriage of Alcatel and Lucent, when the committee scrutinized the impending merger of the two vendors. That deal, of course, got the official green light. (See Alcatel, Lucent Face Security Grilling.)

— Ray Le Maistre, International News Editor, Light Reading