Huawei Bid for 3Com Finally Dead?

Posted by: Bruce Einhorn on March 21, 2008

A few weeks ago I wrote here about the end of the proposed takeover of 3Com by Bain Capital and its Chinese partner Huawei Technologies. At the time, 3Com’s director of PR wrote in to say that “[t]he bid for 3Com by Bain Capital and Huawei has not been withdrawn,” adding that the would-be buyers were working with 3Com to “construct alternatives” that would address the concerns of CFIUS, the U.S. government committee that needs to OK the deal.

Well, it might now be time to admit that proposed Bain-Huawei purchase of 3Com really is kaput. According to the AP (as well as lots of others), Bain Capital has just admited that there’s no deal. “The Boston-based private-equity firm said it had offered 3Com several ways the $2.2 billion deal could be restructured to satisfy the U.S. government, but that no arrangement could be worked out.” The AP also notes that Bain “was notified” that CFIUS would nix the deal. (I tried, in vain, to find the Bain statement online.) For its part, 3Com issued a statement on Wednesday saying “the parties have been unable to agree upon an alternative transaction that addresses CFIUS’ concerns and is acceptable to 3Com’s Board of Directors.”

As I mentioned last time, I think one reason Huawei worries U.S. officials is the company’s lack of transparency. The Washington Post in January quoted a GOP congressman, Thaddeus McCotter, expressing concern: “There is an opaqueness in the relationships between Huawei and many of these Chinese government entities. You’ll never know what has gone back between them.”

The company denies that it is owned by the People’s Liberation Army, and officials say that Huawei is owned by its employees. But companies have lots of employees. Which ones are the biggest shareholders in Huawei? Does any one shareholder or group of shareholders have a controlling interest? Lenovo was able to answer such questions, and not coincidentally Lenovo was able to proceed with its big U.S. deal, the acqusition of the PC business from IBM three years ago. For Huawei to be able to make some progress doing deals in the U.S., I think it probably needs to be able to answer them, too.

Reader Comments

Steven

March 21, 2008 10:08 AM

Bruce,

Don't spread your lies again and again.

China's defense contracts are only going to state-owned defense companies or research institutes.

PLA's companies can make almost everything, from steel to jet fighters. Only recently, China said civilian companies has the same rights to share the contracts.

The boss of Huawei only owns 5% of the company. Huawei employee owns most part. That's why they can work to death. It is estimited thousands of Huawei employees are not milinaires if their Huawei stocks are counted.

Actually, ZTE has a lot more connections with government. But not Huawei.

No one deny Ren Zengfei was a PLA officer. Isn't that normal for a country that has more than 2 million soldiers?

Huawei's products has been used in many countries including Europeans. Are you Americans more smart than them? Only one explanation: US is not a free trade country. It's market is hight protected, especially in hi-tech industries. Not only Chind faces the issue. Europeans do too. Recently, Airbus won a contract, how many Americans are still crying?

Andy

March 26, 2008 2:11 AM

The free trade slogan in the US is just an empty promise. Free trades only work if the US companies want to buy Chinese companies. That is the true color of America free trade slogan.

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