As the successful bidder in the process to take ownership of networking provider Huawei-3Com Ltd., 3Com learned that the spoils don't always go to the victor: 3Com's stock dropped sharply in an indication that investors don't like the deal.
3Com agreed to pay $882 million for Huawei's 49% stake in the joint company, disappointing investors who had been hoping private equity firms would bid more for the stake. In Wednesday trading, 3Com shares fell 35 cents, or 7.8%.
Edgar Masri, president and CEO of 3Com, praised the acquisition. "H3C has proven to be a well-established, standalone business with substantial market share in China and strong potential to expand globally We are very excited at the prospect of owning 100% of the venture."
Private equity firms were circling H3C, but, in the end, they couldn't acquire the company. Because 3Com and Huawei had an existing agreement to permit either party to buy out the other, 3Com's $882 million offer prevailed. The deal must still be approved by the government of China.
H3C and 3Com could end up competing with each other in the future, although a noncompete provision agreed to by the two firms will be in force for 18 months.
Masri said he looks forward to having Huawei as a customer.