UPDATE:Huawei: 3Com Withdrew US Filing On Complex Procedure

By Daniel | February 22, 2008

Last Update: 2/22/2008 6:16:58 AM

(Updates with more comments from Huawei, background.)

By Aaron Back

Of DOW JONES NEWSWIRES

BEIJING (Dow Jones)–Huawei Technologies Co. said Friday the filing to U.S.
authorities to acquire 3Com Corp. (COMS) along with Bain Capital Partners LLC was
dropped due to the “complex” nature of the procedure.

Rising costs and a changed stock-market environment during the past year also
contributed to the decision to drop the application, Huawei said in a statement
Friday.

Huawei and 3Com will continue to have friendly relations and will abide by all
their current bilateral agreements, the Shenzhen-based telecom equipment maker
said.

The Huawei statement didn’t mention whether the company might attempt to revive
the deal, only stating its reasons for dropping the application to a U.S.
committee.

3Com of the U.S. said earlier this week that it was withdrawing its filing to the
Committee on Foreign Investment in the U.S. - an agency led by the Treasury
Department that can recommend that the president block foreign acquisitions on
national-security grounds. The move signals that the deal wouldn’t have been
approved by the agency.

3Com and Bain said in a statement this week they would work closely with Huawei
to come up with alternatives that would address CFIUS’s concerns, but a source
familiar with the situation told Dow Jones Newswires on Wednesday that the deal
was effectively dead.

While the parties would continue talking and are open to a different variation on
the transaction, the stance by CFIUS is a major blow, the source had told Dow
Jones Newswires.

A Huawei spokesman declined to comment when asked if Huawei was still interested
in acquiring a stake in 3Com.

Under an agreement announced in September, Huawei would have acquired a 16.5%
stake in 3Com, which makes telecom and computer gear and also supplies the U.S.
government with some security software. Bain Capital, a private equity fund,
would have held the rest.

But Huawei’s perceived lack of transparency and its founder’s roots in the
People’s Liberation Army made the deal controversial in Washington.

-By Aaron Back, Dow Jones Newswires; (8610) 6588-5848; aaron.back@dowjones.com

(Roger Cheng in New York contributed to this article.)

(END) Dow Jones Newswires

February 22, 2008 06:16 ET (11:16 GMT)

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