Thursday, October 9, 2008

Bain gets third strike from Huawei

By Mass High Tech Staff

After receiving formal bids for its mobile handset unit from private equity firms Bain Capital of Boston and Silver Lake of London and New York last week, China-based Huawei Technologies Co. Ltd. reports it has halted the sale of that business unit, citing market conditions.

Huawei hired Morgan Stanley last spring to help the unit, which industry analysts said could be worth more than $350 billion. According to past reports, a number of firms were interested in the deal, including AEA Investors, Providence Equity Partners and Goldman Sachs’ buyout unit, but all except Bain and Silver Lake pulled out before formal bids were filed in late September.

For Bain Capital, the deal is the firm’s third failed attempt to strike a deal with the Chinese communications equipment giant over the past two years. In 2006, Bain attempted to buy a stake in a joint venture between Huawei and Marlborough-based 3Com Corp., only to have 3Com, which owned 51 percent of the venture already, exercise its option to buy the remaining stake in the partnership.

Last fall, the private equity firm partnered with Huawei to buy 3Com outright for a reported $2.2 billion, but the deal was nixed after the U.S. federal interagency Committee on Foreign Investment in the United States expressed concerns. According to published reports, the main sticking point revolved around the fate of Tipping Point, a division of 3Com that focuses on network security, particularly for governments.

The most recent deal has not been killed entirely, however, with a Huawei statement terming the deal a postponement.