3Com Buyout Doesn't Pass Security Review

National security concerns have scuttled the buyout deal for 3Com by private equity firm Bain Capital and a Chinese telecom, the Wall Street Journal reports. 3Com, which supplies networking services to the Defense Department, withdrew its application from the Committee on Foreign Investment in the US, having been unable to reach an agreement on the involvement of the Chinese company, Huawei.

The deal had stipulated that Bain would buy 3Com and Huawei, which has strong ties to the Chinese government, would in turn buy a 20% stake in Bain. The private equity firm said it had offered many concessions to try to allay national security concerns, and all three companies say they "remain committed to continuing discussions." (More 3Com stories.)