A proposed $3 billion cash deal between 3Com, Bain Capital and China's Huawei has been deemed a legitimate threat to U.S. national security, according to a report by Bill Gertz in the Washington Times.
"The deal is in trouble," the paper an unnamed official as saying, confirming earlier fears that Huawei's involvement could derail the merger.
U.S. intelligence agencies informed a Treasury Department-led review committee recently that a merger between 3Com and a Chinese company would threaten U.S. national security.
Bush administration intelligence officials said the Office of the Director of National Intelligence (DNI) recently submitted a required threat assessment to the Committee on Foreign Investment in the United States, known as CFIUS, which is conducting a 30-day investigation of the proposed deal between 3Com and China's Huawei Technologies.
The assessment, which is classified, described the deal as posing a "threat" to U.S. national security, according to officials familiar with the document.
3Com sells network intrusion-prevention equipment used by the Pentagon and U.S. government agencies and U.S. intelligence officials are concerned the technology China would gain from 3Com will boost the Chinese military's computer warfare capabilities. The company also runs a side business that buys advance access to zero-day vulnerabilities.
Gertz has reported extensively on Huawei's alleged links to illegal high-tech exports to Saddam Hussein's regime and the supply of telecommunications equipment to Taliban-ruled Afghanistan.
The newspaper also ran an editorial urging the U.S. Committee on Foreign Investment in the United States (CFIUS) to "take a careful look at this merger, because what is already known about the deal is deeply troubling."
The CFIUS is the same committee that torpedoed Check Point’s acquisition of Sourcefire over national security concerns.