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China link puts 3Com takeover in doubt

US government extends investigation

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There is another cloud over Bain Capital and Huawei Technologies's takeover of 3Com - the US Congress committee into foreign ownership is extending its investigation into the offered buyout.

In September Bain and Huawei agreed to pay $2.2bn for the networking company. Despite offering a premium of 44 per cent more than the share price, the deal already faces a class action case from shareholders unhappy with the valuation.

Now the Committee on Foreign Investment in the United States (CFIUS) has extended its investigation into the deal by 45 days.

Investigations typically last for 30 days and are not often extended.

The Committee is concerned there may be national security implications to letting the takeover go ahead. Last year Australia, the US, France and the UK all blamed the Chinese government for hacking attacks on government computers.

3Com is a supplier to the Department of Defense, and Huawei will end up with a 16.5 per cent stake in 3Com should the takeover succeed.

The Committee could block the deal altogether or require that 3Com get rid of parts of its business like TippingPoint, its network intrusion software. The FT has more here. ®

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