Huawei-3Com merger suffers setback in US

The proposed merger between networking company 3Com, private-equity firm Bain Capital and Chinese networking provider Huawei is off, for now.

In a statement on its website, 3Com said that the joint filing to the Committee on Foreign Investment in the United States (CFIUS) was withdrawn as the companies were "unable to reach a mitigation agreement" with CFIUS.

Massachusetts-based 3Com had announced at the end of September last year that it would be acquired in a $2.2bn (£1.1bn) cash deal, with Bain as the major owner and Huawei taking a minority stake. It was then reported that the transaction would be finalised during the first quarter of 2008.

According to the statement, all three parties remain committed to continuing discussions, but 3Com stopped short of saying whether the companies plan to issue another filing.

Edgar Masri, 3Com's president and chief executive, said: "While we work closely with Bain Capital Partners and Huawei to construct alternatives that would address CFIUS's concerns, we will continue to execute our strategy to build a global networking leader."

China Daily reported on Friday that Huawei is undaunted by the development, and plans to seek other options to push the bid forward.

According to a report in the Financial Times last week, Huawei's chief marketing officer berated US politicians who had expressed concern that the deal would threaten US national security.

The Financial Times also reported on Thursday that Chinese authorities have appealed to the US government asking for "fair and legal" treatment. An official from China's foreign ministry said the proposed transaction was "a normal business investment in accordance with market rules".