Washington gagged at the thought of Huawei Technologies Co., China’s largest telecommunications equipment maker and reportedly closely tied to China’s military, owning a minority stake in 3Com and so 3Com’s deal to get bought for $2.2 billion cash and taken private by Bain Capital Partners has been shot down on national security concerns.

 

Huawei was cut in on the deal because 3Com needs more business in China and other emerging markets – heck, 50% of its business and all of its profits are already coming out of China – and it had Huawei temporarily at bay because of a soon-to-expire non-compete signed as part of an old joint venture between the two but – with the prodding of Capital Hill – the Committee on Foreign Investments in the United States (CFIUS), the Treasury Department arm that has oversight over such things, was having none of it.

 

3Com said this morning that it was “unable to reach a mitigation agreement with CFIUS for this transaction” and that the threesome had withdrawn their merger application from CFIUS’ review.

 

It also mumbled something – probably unrealistic – about “the parties remain committed to continuing discussions.”

 

To get Washington’s okay, Bain had promised Huawei would have no operational control and would make no decisions or have access to technology that wasn’t commercially available. It was to a 16.5% position, expanding to 21.5%, and three people on the 11-man board.