Bain buyout falls foul of US regulator

The US Committee on Foreign Investment has indicated it will block the acquisition of IT networking company 3Com because of Bain’s minority Chinese trade partner Huawei.

US buyout firm Bain Capital and Chinese telecoms equipment manufacturer Huawei Technologies have withdrawn a regulatory filing connected to their buyout of US IT networking company 3Com for $2.2 billion (€1.5 billion), according to a statement.

The firms did so in the face of regulatory opposition and were unable to reach a mitigation agreement with the Committee on Foreign Investment in the US.

Bain had been told it would not receive approval for the deal from the US body overseeing sensitive foreign investments in the US, according to UK newspaper Financial Times.

Huawei was set to take a 16.5 percent stake in 3Com with seats on the board. In an effort to make the deal more acceptable to the US authorities Huawei would not have had any management control.

3Com is the latest attempted acquisition of a US company to fall through due to the protectionist US committee. Most famously Dubai state-owned DP World was forced to sell the US ports belonging to P&O ferries in its $6.8 billion acquisition of the UK ports and shipping company in 2006.

Huawei is not owned by the Chinese state. But the company's bid may have been scuppered by the non-transparent nature of the company’s ownership, as the firm is not listed and it is described as being owned by its employees, the FT said.

3Com’s share price fell 23.06 percent yesterday to $2.87 per share at the close of US markets.