3Com takeover terminated after fears of spying

The U.S. networking company 3Com was set for a takeover by a partnership between Bain Capital Partners and China’s Huawei Technologies. However, the partnership have abandoned their acquisition attempt after it was blocked by the U.S. government.

Last month, the U.S. Committee on Foreign Investment in the United States (CFIUS) decided to intervene in the sale of 3Com because of security concerns. Bain announced yesterday that the CFIUS have since decided to prohibit the sale of 3Com, and so the takeover bid has been withdrawn.

Under the terms of the proposed $2.2 billion takeover, Boston-based Bain would have owned an 83.5% stake of 3Com, with Huawei holding the rest of the company. However, critics of the takeover were concerned about Huawei’s close links with the Chinese government. Of particular concern was the fact that the U.S. Department of Defence uses 3Com products to protect against hacker intrusion.

Bain’s press release concerning the withdrawal stated that the the “CFIUS made clear that it intended to take action to prohibit the proposed transaction.”

The CFIUS have yet to release a statement.

3Com say that they are planning to go ahead with a shareholder meeting today in which they will decide whether or not to accept Bain’s offer.