U.S. government nixes 3com deal, in your face China!

After the Committee on Foreign Investment in the US (CFIUS) signaled its intention to block the transaction, Bain Capital and Huawei Co. have called off the planned purchase of US-based 3Com. The deal, which was agreed to last September, had China-based Huawei and private-equity firm Bain Capital acquiring 3Com for $2.2 billion.

The deal was structured so that Huawei would have a minority 16.5 percent stake in the company, as it would have been one of Bain’s “affiliates.” As is customary for deals involving buyouts of US companies by foreign investors, the transaction was submitted to CFIUS for its approval.

The US government expressed fears, however, that the deal had siginficant national security implications. Lenovo’s purchase of IBM’s PC business caught the attention of CFIUS in 2005, with the Committee examining the transaction carefully to ensure that IBM’s facilities would not be used for industrial espionage. CFIUS approved the deal a few months later, though it later reviewed a huge purchase made by the US State Department from the hardware company. (link)

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