3Com Goes Private for $5.30/Share

Telecom equipment maker 3Com announced Friday it is being acquired by Bain Capital for $2.2 billion, or $5.30/share -- a 44% premium to Thursday's close. Chinese networking giant Huawei Technologies will take a minority stake in the deal, and become a commercial and strategic partner of 3Com. Sources say Nortel Networks was interested in 3Com (full story), but that it may have balked when Bain secured Huawei's participation. Huawei has a non-competition pact with 3Com's crown jewel, a Chinese networking operation called H3C. Were Nortel to have bought 3Com, voiding the pact, it would soon have faced strong competition from Huawei. 3Com took full control of H3C in November by paying $882 million for the 49% it didn't own, enabling it to better tap bustling Chinese demand for networking equipment. "The 3Com Board of Directors and senior management team have thoroughly reviewed our strategic alternatives and have determined that the agreement with Bain Capital provides the best value for 3Com shareholders," said 3Com CEO Edgar Masri. "We believe that this agreement better positions 3Com to establish itself as a global networking leader, which will benefit our employees, our customers and our partners." Analysts say the deal may be a signal of strength returning to a sagging LBO market (full story). Trading in 3Com shares was halted before the open. Shares were up 32.6% to $4.88 in heavy pre-market trading.

Sources: Press release, Wall Street Journal
Commentary: 3Com, Sonus And Tellabs: Possible Nortel Targets • 3Com: Beneficiary of Online Video?
Stocks/ETFs to watch: COMS. Competitors: CSCO, HPQ, NT, ALU
Earnings call transcript: 3Com F1Q08

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Comments

[Lisa]

Not surprised 3Com is being taken out. 3Com has never seemed to do well, and the stock got a boost only because people like Fred Hickey claimed it would do well due to the Huawei JV. But that never came to anything.

[Carpe Max]

3Com needed a serious shot in the arm. Some interesting information from NewsVisual www.newsvisual.com/new... , according to one of their KnowledgeMaps it's possible that this deal was a result of the ties some of the directors share, particularly through Stanford University.