Networking pioneer 3Com, the dominant player prior to being supplanted by Cisco Systems, has been acquired by a private equity firm in a $2.2 billion cash deal on Friday.
Private-equity firm Bain Capital will take a stake of more than 80% in 3Com, while networking behemoth Huawei Technologies of China will purchase the rest. At $5.30 a share, it is a 44% premium to 3Com’s closing price on Thursday.
Admittedly, even that is a far cry from the heights of 3Com’s shares in the 1990s.
Excerpt from the Wall Street Journal:
Huawei was crucial to Bain securing 3Com. That is because the Chinese company has a noncompete agreement with 3Com, stemming from the previous joint venture. That deals lapses in 2008. Should the buyer have been a company such as Nortel Networks Corp. – which was involved in the auction, people close to the deal say – it would have faced competition from Huawei in short order. That would be a daunting prospect given that Huawei is also an H3C customer, responsible for 30% of its revenue.
Frank Dzubeck, a networking consultant, summed up sentiments in the IT industry when he told the Journal, “3Com has been on one of the industry’s longest death spirals.”