Firms in proposed 3Com deal offer risk relief

Firms in proposed 3Com deal offer risk relief
Firms in proposed 3Com deal offer risk relief 

By Bill Gertz
The Washinton Times
February 13, 2008

Companies involved in the proposed merger of 3Com and a Chinese 
telecommunications company have offered to take steps to reduce the 
national security risks from the deal in seeking to win the Bush 
administration's approval.

Bain Capital, the international investment firm leading the $2.2 billion 
bid by Huawei Technologies to buy 3Com, announced yesterday it has 
offered "mitigation proposals" to the Treasury Department-led Committee 
on Foreign Investment in the United States (CFIUS) as part of its 
ongoing dialogue on the merger.

Disclosure of the risk-reduction offer followed the arrest Monday of 
four persons on Chinese espionage-related charges, including a Pentagon 
official accused of passing high-technology military command and control 
systems to the Chinese.

"As part of that dialogue, we have put on the table robust mitigation 
proposals that offer significant structural and security safeguards to 
American national security interests," Bain Capital said last night. "At 
this sensitive time for the U.S. and global economies, we think it is 
critical that responsible cross-border investments like the 3Com 
transaction be permitted to move forward on sound economic terms, while 
fully protecting American national security."

Bain Capital spokesman Alex Stanton declined to comment on the details 
of the proposals.

A person close to the deal said 3Com is proposing to sell its 
TippingPoint division that makes high-technology computer intrusion 
prevention equipment. "That is one division that does have advanced 
technology," the source said.

TippingPoint has sold computer attack prevention systems to the Pentagon 
and other U.S. government agencies and is a reason the 3Com sale to 
Huawei has raised concerns among U.S. intelligence officials who say 
China could learn important vulnerabilities of U.S. networks.

Chinese military hackers have engaged in widespread computer attacks on 
Pentagon, U.S. government and private sector networks over the past 
several months, as part of what officials think is a systematic effort 
to prepare for electronic warfare during any future conflict.

A U.S. intelligence assessment of the 3Com deal determined that the 
merger without restrictions would undermine U.S. national security, 
administration officials said. The CFIUS is in a second phase, 45-day 
review of the merger.

Bain Capital said one of CFIUS' missions is to protect U.S. national 
security. The investment firm has said the deal will not jeopardize 
national security.

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