3Com Acquisition Under Investigation

Bain Capital, a U.S. equity investment firm, declined to comment Wednesday on news reports that a U.S. government panel reviewing a proposed acquisition of networking vendor 3Com plans to extend its review.

Bain would get an 83.5 percent stake in 3Com and Chinese networking giant Huawei Technologies would get the remaining piece in the US$2.2 billion deal. The Committee on Foreign Investment in the United States (CFIUS), part of the U.S. Department of Treasury, is investigating whether the investment by Huawei poses a risk to U.S. national security after Bain voluntarily submitted the deal for review in October.

Normally, a CFIUS review runs for 30 days, but the interagency committee can take another 45 days. The Financial Times on Tuesday reported that CFIUS this week would likely take the additional time.

A Bain spokesman declined to comment on the news report Wednesday, saying the CFIUS review was a "confidential process."

"Bain Capital is working closely with CFIUS to provide U.S. officials with information about the proposed transaction," the company said in a statement. "As stated previously, we believe CFIUS will conclude that the company will remain firmly in the control of an American firm, has only a small minority foreign shareholder, and that the deal presents no risks to national security."

Some critics have disagreed. U.S. Representative Thaddeus McCotter, a Michigan Republican, has called on CFIUS to reject the deal. Huawei's take in 3Com, which markets intrusion detection systems, would "gravely compromise" U.S. national security, he said in a House floor speech in October.

The U.S. Department of Defense uses 3Com intrusion detection products, and Chinese hackers have targeted the agency, McCotter said. "Given this and other instances of communist China's persistent cyber warfare against us, approving this sale would be an abject abdication of CIFUS' duty to protect America's vital defense technologies from enemy acquisition," he said.

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