Bain Capital terminates deal with 3Com

By Lisa Kerner

Charlotte, N.C., March 20 - A Bain Capital Partners, LLC affiliate said it is terminating the merger agreement with 3Com Corp. because the U.S. Government's Committee on Foreign Investment in the United States planned to take action that would prohibit the transaction, it was announced on Thursday.

According to a Bain Capital news release, the investment firm made several alternative proposals to 3Com that it believed could have satisfied the committee's concerns, but no mutual agreement could be reached.

On Wednesday, 3Com said it would convene its special meeting of shareholders on Friday as planned for the sole purpose of voting on 3Com's existing merger agreement with the Bain Capital affiliates.

As previously reported, holding the meeting and the vote would preserve 3Com's right to pursue a break-up fee under certain circumstances.

In response to Bain's announcement, 3Com said it did not believe the move was valid, arguing that the reasons cited by Bain "are not grounds for termination of the agreement."

3Com said it will continue to hold the shareholder meeting as part of fulfilling its obligations.

The company also said it will seek payment of the $66 million termination fee.

Under the agreement, 3Com shareholders were slated to receive $5.30 in cash per share and 3Com would have become a private company, wholly owned by affiliates of Bain Capital. Affiliates of Huawei Technologies Co. Ltd. would have also acquired a minority interest in 3Com.

3Com and affiliates of Bain Capital and Huawei Technologies withdrew their joint voluntary filing with the Committee on Foreign Investment in the United States after failing to reach a mitigation agreement with the committee.

On March 6, 3Com announced it would reconvene and immediately adjourn its March 7 shareholders meeting without taking a vote on the pending merger.

3Com previously announced it would convene and adjourn its Feb. 29 meeting, rescheduling that meeting for March 7.

It was previously reported that the meetings were adjourned to give Bain Capital and 3Com time to address the concerns raised by the committee.

In September, 3Com agreed to be acquired by affiliates of Bain Capital for $2.2 billion.

Bain, a Boston investment firm, received financing commitments from Citigroup Global Markets Asia Ltd., UBS AG, the Hongkong and Shanghai Banking Corp. Ltd., ABN Amro Bank NV and Bank of China (Hong Kong) Ltd.

3Com, located in Marlborough, Mass., provides secure, converged voice and data networking solutions.

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