The recent decision by Bain Capital Partners to terminate its September agreement to acquire 3Com Corp. didn’t stop the networking company’s shareholders from overwhelmingly approving the deal.
3Com said it believes the Bain gave for the bail-out are not sufficient grounds for termination, so it will continue to fulfill its obligations under the deal’s terms and pursue a $66 million termination fee.
Bain said last Thursday that it would not complete the deal, citing national security concerns raised by the U.S. government, the Associated Press reported. “We don’t believe the deal is terminated,” John Vincenzo, a 3Com spokesman, told the wire service.
The AP noted that lawmakers and Bush Administration officials have been concerned about the merger ever since it was announced because wireless provider Huawei, which reportedly has strong ties to the Chinese military, would hold a 16.5 percent stake in 3Com. The feeling in Washington is that sensitive military technology could be transferred to China.
Bain reportedly has offered 3Com alternative proposals, including revising financial terms and restructuring the deal to satisfy national security concerns. But the parties have been unable to hammer out a new agreement.
The private-equity firm also has said the Committee on Foreign Investment in the United States had signaled its intention to block the deal. Bain reportedly has offered several concessions to CFIUS in order to get the deal approved, including the divestment of a 3Com subsidiary that makes network-security software.
CFIUS is a 12-agency group that can recommend whether the White House should block or alter terms of deals that involve national security.
3Com acknowledged it has received alternative proposals to save the deal but felt they were not in the best interests of the company or its shareholders, according to the AP report.