3Com Sale Collapses on Security Concerns

Panel objects to Chinese tech company's role in deal
By Jim O'Neill,  Newser User
Posted Mar 21, 2008 10:02 AM CDT
The headquarters building of Huawei Technologies, China's biggest maker of telecommunications equipment, is seen in Shenzhen, in south China's Guangdong province.   (AP Photo)
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(Newser) – National security concerns have blocked the $2.2 billion sale of network-equipment maker 3Com Corp to US private equity firm Bain Capital Partners and a Chinese technology company, Reuters reports. Lawmakers had opposed the deal because Huawei, China's biggest network equipment maker, is purported to have ties to China’s People’s Liberation Army.

Bain said it had been unable to structure a transaction with 3Com that would be acceptable to the federal watchdog Committee on Foreign Investment. 3Com disputes the reason for the collapse and says it will seek a $66-million breakup fee from the buyers. The original deal gave Huawei up to a 21.5% share of 3Com, which makes security technology for large businesses and governments.