Bain calls off merger deal with 3Com

3Com Corp. shareholders gave green signal to a merger agreement with Bain Capital on Friday, only a day after a United States Security panel raised opposition to the deal. Bain had said on Thursday that it is terminating its agreement with China’s biggest network equipment maker, Huawei Technologies, to purchase 3Com.

3Com said it did not believe the reasons given by Bain for calling off the proposed buyout were valid. Also, 3Com is endeavoring to land a break-up fee from Bain for killing the $2.2 billion deal.

"3Com will continue to fulfill its obligations under the terms of the existing merger agreement while it pursues the $66 million termination fee payable under the merger agreement," it said in a statement.

Bain said it received information that the Committee on Foreign Investment in the United States would take action to block the deal on national security grounds. Under the terms of the original agreement, Huawei Technologies would have got a minority stake in 3Com, which does substantial business with the U.S. government.

The three companies had voluntarily given joint notice to the security panel, which is led by the Treasury secretary, in connection with the proposed deal.

3Com, which sells security technology as well as network equipment, was to sell a stake of up to 21.5 percent to Huawei, which would not have not awarded it the control of 3Com or an access to critical American technology, according to the terms of the deal.

However, lawmakers in the United States lawmakers were concerned that the deal threatened national security because of suspected ties between Huawei and the Chinese military.

Huawei remains firm that it is just a private company owned by employees, but its founder, Ren Zhengfei, was a former soldier in the People’s Liberation Army.

3Com shares were down 24 cents, or 11 percent on Thursday, to $1.98. Earlier, they fell as low as $1.76.