October 15, 2007 / 4:19 PM / 12 years ago

U.S. lawmakers say 3Com-Bain-Huawei deal a threat

WASHINGTON (Reuters) - Eight U.S. lawmakers are backing a bill suggesting that a proposed buyout of high technology group 3Com Corp COMS.O by a private equity firm and a Chinese company “threatens the national security of the United States,” a congressional aide said on Monday.

Coming at a time of growing tension over Chinese imports and corporate expansion, the nonbinding resolution is sponsored by Florida Republican Rep. Ileana Ros-Lehtinen and supported by eight other House of Representatives members.

It says the 3Com transaction “should not be approved by the Committee on Foreign Investment in the United States” (CFIUS), a inter-agency U.S. governmental panel that reviews corporate acquisitions involving foreign buyers.

“It would be a grave error for U.S. regulators to approve a deal that permits minority ownership in 3Com by one of the least transparent companies operating in China, a firm with shadowy ties to Chinese army and intelligence services,” Ros-Lehtinen said in a statement.

Massachusetts-based 3Com said on Thursday that a 16.5 percent stake in the company would transfer to China’s Huawei Technologies Co Ltd HWT.UL as part of an agreement in which Bain Capital would buy out 3Com for $2.2 billion.

Huawei’s stake in 3Com could rise another 5 percent under the terms of the agreement, 3Com said.

Bain, a major private equity firm, has voluntarily agreed to submit the deal for review to CFIUS.

Attempting to pre-empt any possible government security concerns, 3Com said Huawei would not have access to sensitive U.S. technology or U.S. government sales.

Neither will China’s biggest network equipment maker have operational control or ability to make decisions for 3Com, according to a regulatory filing by 3Com.

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