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Huawei

Bain Capital confident acquisition of 3Com will not be hampered

PUBLISHED : Thursday, 04 October, 2007, 12:00am
UPDATED : Thursday, 04 October, 2007, 12:00am

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Bain Capital, which is teaming up with Shenzhen's Huawei Technologies to buy 3Com Corp of the United States, is confident the acquisition can proceed, despite a possible probe of the deal by Washington.

'I don't know whether they will investigate the deal or not,' said Jonathan Zhu, a Bain Capital managing director based in Hong Kong. 'There are people who are kind of ignorant and raising the issue ... it may be some politicians who want to stir up the pot. We can't control that. But we feel confident we can finish the deal.'

Last Friday, 3Com said it had agreed to a takeover proposal by the US-based private investment firm and Huawei for US$2.2 billion. Huawei, the mainland's largest wireless equipment provider, would take a 16.5 per cent stake in the maker of networking and network security equipment.

However, the deal might face an investigation by the US government on national security grounds, a newspaper reported at the weekend.

'It is Bain Capital buying 3Com, not Huawei,' said Mr Zhu in a telephone interview. 'It is not foreign ownership of a US business.'

In 2003, Huawei set up H3C in a joint venture with 3Com. It sold a 2 per cent stake in the venture to 3Com for US$28 million in 2005 and the remaining 49 per cent stake for US$882 million last year.

The current deal is expected to be closed in the first quarter of next year. Bain Capital would then restructure 3Com, whose business had 'underperformed', Mr Zhu said.

'Whenever China buys sensitive technologies from the US, it will be challenged by US right-wing politicians,' said Cheng Yu-shek, a political science professor at City University of Hong Kong. 'Even if China wants to buy a supercomputer to explore natural resources, extreme opinion leaders will suspect it is using it to design missiles.'

Mr Cheng said the Bush administration should consider both national security issues and free market principles before deciding whether to block the deal.

In April, Asia Satellite Telecommunications Holdings, which operates three satellites covering the region, said the US State Department rejected a privatisation plan proposed by AsiaCo, a joint venture between the mainland's State Council-controlled Citic Group and GE Capital Equity Investments of the US.

Analysts said the refusal was due to national security reasons.