Bain Capital buying 3Com for $2.2 billion

The long-rumored private equity buyout of communications networking company 3Com Corp. came to fruition today, as Bain Capital and Chinese networking company Huawei Technologies acquired 3Com for $2.2 billion in cash.

3Com shareholders will receive $5.30 per share for their stock, a premium of 44 percent over 3Com's Thursday closing price of $3.68. The company's shares jumped as high as $5.11 in morning trading on the Nasdaq Stock Market.

“We believe that this agreement better positions 3Com to establish itself as a global networking leader, which will benefit our employees, our customers and our partners,” said 3Com president Edgar Masri.

3Com makes data network switches, security appliances and Internet Protocol-based telephone equipment. Once a world leader in networking technology, the company has never fully recovered from the collapse of the Internet boom of the late 1990s.

Today, 3Com derives over half its revenues from sales in Asia, largely thanks to its H3C Technologies Ltd business in China. H3C was born as a joint venture between 3Com and Huawei, but last year 3Com acquired the entire H3C operation for $882 million.

Reports that Bain was in talks with 3Com have circulated for months. Abner Germanow, networking analyst for IDC Corp. in Framingham, said the deal may finally have come to fruition now because recent declines in 3Com's stock price have lowered the cost of the transaction.

Germanow said that taking 3Com private could put the company in a better position to overhaul its products and sales channels to compete against industry giant Cisco Systems Inc. "It's a combination of access to capital and removing the pressure to deliver results to Wall Street every quarter," Germanow said.

3Com founder Bob Metcalfe is now a a principal at Polaris Venture Partners, a venture capital firm in Waltham. Metcalfe said Bain was probably attracted by 3Com's strong position in a booming Asian data networking market, as well as recent growth in 3Com's revenues. "Bain obviously thinks they see an opportunity the public markets don't see," said Metcalfe.
(By Hiawatha Bray, Globe staff)