Setback for 3Com-Bain-Huawei deal

The proposed merger will not happen, at least for now, as the companies announce the withdrawal of a filing on the transaction to U.S. authorities.

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

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its Web site, 3Com said that the joint filing to the Committee on Foreign Investment in the United States (CFIUS) was withdrawn as the companies were "unable to reach a mitigation agreement" with the CFIUS.

Massachusetts-based 3Com had announced at the end of September last year that it would be acquired in a US$2.2 billion cash deal, with Bain as the major owner and Huawei taking a minority stake. The transaction was then reported to be finalized during the first quarter of 2008.

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

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

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

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

The Financial Times also reported Thursday that Chinese authorities have appealed to the U.S. 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".