Infrastructure
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9/28/2007
10:18 AM
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3Com To Be Sold To Bain Capital Partners; Huawei Gets A Piece

Bain Capital Partners plans to pay $2.2 billion in cash for the networking company, and 3Com's longtime partner Huawei Technologies will participate in the transaction.

3Com said it will be acquired by Bain Capital Partners in a $2.2 billion cash deal that will see 3Com's longtime partner Huawei Technologies participate in the transaction.

3Com and Huawei have been involved in Byzantine negotiations and agreements in recent months, the most recent in November when 3Com agreed to pay $882 million for Huawei's 49 % stake in their joint Huawei-3Com Ltc.

In the latest development, announced early Friday morning by 3Com, the Marlborough, Mass.-based firm said it would be acquired by "affiliates of Bain." At least some of the financing for the deal is said to be coming from Chinese sources.

"As business becomes ever more global, companies need to enhance their technology infrastructure to compete more effectively in the broader economy," Jonathan Zhu, a Bain Capital managing director, based in Hong Kong, said in a statement. "3Com has a strong competitive position, and we believe there are significant opportunities to grow by acquiring customers and introducing new products."

3Com's announcement stated that "affiliates of Huawei Technologies" will acquire a minority interest in the company and become a commercial and strategic partner of 3Com.

Rumors of deals and counter-deals have swirled around 3Com for months. Nortel Networks had been talking with 3Com, according to some reports, but couldn't forge a deal. 3Com has a long history with Huawei. And private equity funds have been circling 3Com for months, even after 3Com bought out Huawei's interest in the November deal.

The two firms have partnered together for years in developing advanced networking products so the relationship, although tipped upside down now, is steeped with a long history of product development and cooperation.

3Com's financials had continued under pressure recently -- earlier this month it reported that its first quarter loss had grown from $14.1 million to $18.7 million.

3Com's stock surged more than 35% in early trading Friday on the news of the deal.

WhenEdgar Masri joined 3Com as CEO in August of 2006, it wasn't lost on observers that he came from an investment and venture capital firm, Matrix Partners. With his financial background and his former position as an executive at 3Com, he was regarded as a perfect person to conduct negotiations with Bain and Huawei.

3Com initially founded Huawei-3Com in November of 2003 to build routers and switches.

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