3Com is suing Bain Capital to retrieve the US$66 million termination fee of a failed takeover of 3Com by Bain and Huawei Technologies.
3Com filed the suit last week in the Delaware Chancery Court against Diamond II Holdings, an entity controlled by affiliates of Bain Capital Partners. The lawsuit alleges breach of the terms of the US$2.2-billion merger agreement among 3Com, Diamond II Holdings and Diamond II Acquisition Corp., dated September 28, 2007.
Under those terms, 3Com shareholders were to have received US$5.30 per share in cash, and Diamond II Holdings was to have acquired 3Com. The deal was scuttled, however, when the companies could not allay the national security concerns of the US Committee on Foreign Investment in the United States (CFIUS).
The deal raised security concerns because of Huawei's close ties with the Chinese government. Under the proposed deal, Bain would have owned an 83.5 per cent stake in 3Com, with Huawei owning the remainder.
The companies could not convince CFIUS, part of the US Department of the Treasury, that the investment by Huawei did not pose a risk to US national security.
Last month, 3Com won a US$70 million patent infringement award against Realtek Semiconductor.