Joint acquisition of 3Com imminent
Published: 02 Oct 2007 10:52 BST
3Com is poised to be acquired jointly by a private equity firm and Chinese network equipment maker Huawei.
The private equity firm, Bain Capital, will take a majority share, with Huawei taking a minority, according to 3Com, which has approved a bid that values 3Com at $2bn (£980m) and which will pay shareholders 44 percent above the market value of their shares. The precise size of the respective shares has not been disclosed.
"There's a big benefit in going private," said 3Com's investor relations spokesman John Vincenzo. "The company can make strategic decisions on a long-term basis, not on a short-term quarterly focus, and build a global networking operation."
Last year, Huawei and 3Com broke up a joint venture, Huawei-3Com or H3C, set up in 2003 with headquarters in Hong Kong and factories in China. 3Com paid $882m (£443m) for Huawei's 49 percent share in that venture.
The takeover could be good news for 3Com business customers, giving the company more muscle to service a market that 3Com has jumped in and out of over the past 10 years. "It is clear we are an enterprise player," said Vincenzo. "We've been building that for a number of years. If and when we get approval [for the bid], the new owners will have a say, but the enterprise is absolutely the market we are going after."
Parts of 3Com see it slightly differently, notably the company's TippingPoint subsidiary. "We sell high-end security equipment for large enterprises, while 3Com mainly sells commodity networking equipment to SMEs," said Neal Harsell, vice president of marketing at TippingPoint, speaking before the Bain-Huawei deal was announced.
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3Com bought TippingPoint as part of a bid to improve its sales among large enterprises, but in June, 3Com announced plans to spin TippingPoint back out again with an IPO. Those plans were postponed till 2008, said Vincenzo, but the spin-off remains in the company's plans.
"TippingPoint focuses on super-large enterprises," Vincenzo said, who contrasted TippingPoint's approach of overlaying the network with its security appliances, compared with 3Com's approach of building security into its switches.
3Com will retain its agreement to resell TippingPoint's appliances, and the planned IPO would leave 3Com with the X-Series UTM product, a version of TippingPoint's devices aimed at smaller businesses.
"The planned IPO [of TippingPoint] now falls after the acquisition [by Bain/Huawei], so it seems likely that Bain will make the ultimate decision," said Vincenzo.
Earlier this year, telecoms equipment maker Avaya cited similar reasons to go private with a purchase by Silver Lake Partners and the Texas Pacific Group for $8.2bn (£4bn).
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