Bain Gives Up on 3Com Deal

The plan to take 3Com (COMS Quote) private has officially fallen apart.

An affiliate of Bain Capital Partners said the private equity firm has terminated its merger agreement to acquire 3Com after the Committee on Foreign Investment in the United States said it wouldn't support the $2.2 billion deal. Shares of 3Com were tumbling 26 cents, or 11.7%, to $1.96.

"Bain Capital made several alternative proposals to 3Com that we believe could have satisfied the concerns raised by CFIUS," the firm said in a press release. "We regret that we were unable to agree upon an alternative transaction."

In September, Bain and China-based Huawei Technologies entered the merger agreement to acquire 3Com, with Huawei taking a minority stake in the networking company. U.S. officials later expressed concerns over the fact that the Huawei has strong ties with the Chinese government and that sensitive military technology could be compromised.

Last month, the two withdrew their bid for 3Com to the CFIUS and later submitted a retooled plan for government approval.

Shares of 3Com have been on a roller-coaster ride amid uncertainty over whether the deal would close. The stock fell 23% on Feb. 20 on word that the initial bid had stalled, but then surged days later after it appeared the sides would try to go forward with new terms. 3Com is now down 31% over the last two sessions and 56% for the year.

The CFIUS was originally established in 1975, mainly to monitor and evaluate the impact of foreign investment in the U.S. A 1988 executive order gave CFIUS the ability to receive notices of foreign acquisitions of U.S. companies so that it could determine whether a particular purchase would raise national security issues.