3Com Seeks $66 Million For Failed Merger

Approving the failed deal allows 3Com to aggressively pursue a $66 million termination fee since Bain backed out of the buyout agreement that would've made 3Com a wholly owned company of the investment firm.

In a filing with the Securities and Exchange Commission 3Com said Friday that nearly 70 percent of its shareholders voted in favor of the Bain acquisition.

In a statement Marlborough, Mass.-based 3Com said it believes Bain's termination of the merger agreement was invalid and it will fight Boston-based Bain for a break-up fee.

"3Com believes that the reasons cited in Bain Capital's press release are not grounds for termination of the agreement," 3Com said in the statement.

On Thursday, Bain released a statement saying it has terminated the agreement after merger talks with 3Com dissolved. Bain said the Committee on Foreign Investment in the United States (CFIUS) was going to prohibit the deal, which would've given a 16 percent stake to Huawei Technologies, China's largest networking equipment maker.

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

3Com, however, said the discussions could not produce an agreement that it felt benefited shareholders.

"3Com acknowledges that Bain Capital did submit non-binding, confidential proposals to the 3Com Board of Directors, however, the Board determined such proposals were not in the best interest of shareholders," 3Com said.

In September, 3Com's Board of Directors unanimously approved a definitive merger agreement under which 3Com would be acquired by Bain for roughly $2.2 billion in cash, with Huawei getting a minority stake. Had the deal gone through, 3Com share holders would've received $5.30 in cash per share and 3Com would have become a private company, wholly owned by affiliates of Bain. Huawei would have acted as a commercial and strategic partner of 3Com.

Bain and 3Com had originally volunteered for CFIUS to review the merger deal. CFIUS monitors and reviews international mergers and can block deals that it feels put national security at risk. Huawei's role in the merger raised red flags because of its ties to the communist government, while 3Com sells products from its TippingPoint network security division into the U.S. Department of Defense. Bain said CFIUS would've rejected the deal based on national security concerns.

In February, Bain and 3Com withdrew their CFIUS filing to buy enough time to hash out a new agreement, which Bain said stalled, prompting the merger's termination.

Despite the deals death, 3Com shareholders on Friday voted to approve the merger agreement. Obtaining shareholder approval is a condition to seeking the $66 million break-up fee payable under the failed merger agreement.