3Com shareholders overwhelmingly approved a merger offer on Friday that had been cancelled the day before.
The vote appeared to be designed to ensure 3Com could get a US$66 million breakup fee as compensation for pursuing a merger with Bain Capital Partners and Huawei Technologies that was proposed last year. The $2.2 billion deal would have taken 3Com private and put 16.5 per cent of the company’s shares in the hands of Huawei, a large networking vendor partly owned by the Chinese government.
The deal was put on hold last month because of concerns expressed by the Committee on Foreign Investment in the U.S. (CFIUS) after the partners voluntarily submitted it to the agency. 3Com, based in Marlborough, Massachusetts, is a relatively small player in networking equipment but makes some intrusion-detection products. U.S. Representative Thaddeus McCotter, a Republican from Michigan, has said the U.S. Department of Defense uses that security gear and having 3Com partly owned by a company linked to the Chinese government could endanger national security.
After the negative finding by CFIUS, the parties said they were trying to modify the deal so it could be approved. But on Thursday, Bain said it had given up because CFIUS planned to act to stop the deal.
3Com said Thursday that Bain’s termination was invalid because the reasons Bain cited weren’t grounds to end the deal. At the same time, 3Com said it would fulfill its obligations under the deal while pursuing the breakup fee. To get it, 3Com shareholders would have to approve the merger, the company said.
The shareholders approved the defunct merger by a vote of about 281.5 million to 7.5 million shares, with 4.2 million shares abstaining, according to a U.S. Securities and Exchange Commission filing.
