Bain Capital to buy 3Com for $2.2 bn

NEW YORK /SAN FRANCISCO: 3COM, the unprofitable maker of computer-networking equipment,agreed to a $2.2 billion takeover bid from Bain Capital.

Bain said it will pay $5.30 a share for Marlborough, Massachusetts-based 3Com, 44% more than Thursday’s closing price. Huawei Technologies, which once shared a joint venture with 3Com, will take a minority stake.

The bid for 3Com, which hasn’t turned an annual profit in seven years, gives Bain and Huawei, the Chinese Huawei-3Com unit, which 3Com took ownership of last year. The unit is a profitable part of an unprofitable business, according to Kaufman Brothers’s Manuel Recarey.

H-3C “is the crown jewel of the company,” said the New York-based analyst, who rates the shares “hold” and doesn’t own them. “Having the Huawei name certainly helped and they were able to really capitalise in the growth in China.”

The shares rose $1.20 to $4.88 in early trading and closed at $3.68 on the Nasdaq Stock Market on Thursday. Trading was halted at 8:06 am pending the news. The Wall Street Journal reported the offer earlier on Friday.

Integrating H-3C has been a “distraction,” chief financial officer Jay Zager said this month. The company, which doesn’t disclose H-3C’s earnings, reported a wider loss in the latest quarter after losing customers to Cisco Systems and others.

3Com was founded in 1979 by Robert Metcalfe, who invented the ethernet technology that is now the standard for personal computer networks. In 1987, 3Com merged with Bridge Communications, which was co-founded by Eric Benhamou, now 3Com’s chairman.

3Com spokesman Kevin Flanagan didn’t immediately return phone messages left before regular business hours. Alex Stanton, a spokesman for Boston-based Bain, didn’t immediately return a call.

Bain has participated in technology buyouts such as last year’s e3.4 billion ($4.83 billion) acquisition of Royal Philips Electronics' semiconductor unit and the $3 billion takeover of Texas Instruments' sensors and controls division