As I predicted two weeks ago, the 3Com/Bain Capital/Huawei transation has raised eyebrows in national security quarters.
3Com, which sells networking hardware and software and runs a side business that buys advance access to zero-day vulnerabilities, has voluntarily agreed to subject the $2 billion cash deal to review by the U.S. Committee on Foreign Investment in the United States (CFIUS).
This is the same committee that torpedoed Check Point’s acquisition of Sourcefire over national security concerns.
In an 8-K filing, 3Com is taking the offensive, insisting that the Chinese connection (Huawei Technologies is taking a financial stake) “presents no risks to U.S. national security.”
Some highlights from the filing:
- As 83.5 percent owner, Bain Capital will be firmly in control of 3Com. All Bain Capital private equity investments are controlled by 14 individuals, and all 14 are U.S. citizens. Bain Capital will be able to make all operational decisions for the company, to set budgets, to spend money, to make investments, and to hire and fire personnel. Huawei will not have any control over the operation of the business.
- Huawei will not have any access to sensitive U.S.-origin technology or U.S. Government sales as a result of this transaction.
- All of 3Com’s sales to the U.S. Government are made through resellers or integrators; 3Com does not contract with the Government directly.
- There are no products specially designed for the U.S. Government. There are no classified contracts or facility clearances.
- 3Com maintains effective internal IP control and export compliance programs to prevent unauthorized transfers of controlled technology.
- 3Com’s commitment to these controls runs from the chief executive and throughout the company. 3Com maintains multiple screening processes for customers, products and data transfers, including an automated screening program integrated with its order management system.
- The company’s products and technology are classified and tracked consistent with applicable laws and regulations. It conducts regular training and auditing to ensure security. Bain Capital is committed to maintaining these strong compliance and security programs.
More from the Wall Street Journal on the security implications of the transaction, including the role of Mitt Romney, who founded Bain Capital and now is campaigning to become the 2008 Republican presidential nominee.
