3Com Agrees to $2.2 Billion Takeover Offer From Bain

3Com Corp., the maker of computer- networking equipment that has been losing money since 2000, agreed to a $2.2 billion takeover bid from Bain Capital LLC and a former Chinese partner.

Bain said it will pay $5.30 a share for Marlborough, Massachusetts-based 3Com, 44 percent more than yesterday's closing price. Huawei Technologies Co., which once shared a joint venture with 3Com, will take a minority stake.

The bid for 3Com, which competes against Cisco Systems Inc. in the $16 billion market for network switches, would let Bain tap booming demand for gear in China. 3Com's Chinese Huawei-3Com unit accounted for more than half of the company's sales last year.

The Chinese unit ``is the crown jewel of the company,'' said Manuel Recarey, an analyst at Kaufman Brothers LP in New York. He rates the shares ``hold'' and doesn't own them. ``Having the Huawei name certainly helped and they were able to really capitalize in the growth in China.''

The shares rose $1.30, or 35 percent, to $4.98 at 11:07 a.m. New York time on the Nasdaq Stock Market. Trading was halted at 8:06 a.m. pending the news. The Wall Street Journal reported the offer earlier today.

Integrating H-3C has been a ``distraction,'' Chief Financial Officer Jay Zager said this month. The company reported a wider loss in the latest quarter after losing customers to San Jose, California-based Cisco.

Ethernet Technology

3Com was founded in 1979 by Robert Metcalfe, who invented the ethernet technology that is now the standard for personal computer networks. In 1987, 3Com merged with Bridge Communications, which was co-founded by Eric Benhamou, now 3Com's chairman.

The company's share of the $16 billion network-switch market shrank to 2.1 percent last year from 4.9 percent in 2000, according to researcher Dell'Oro Group in Redwood City, California. Cisco's share grew to 72 percent from 60 percent in the same period.

Alex Stanton, a spokesman for Boston-based Bain, didn't immediately return a call seeking comment.

Buyout firms have announced 118 acquisitions of technology companies this year valued at $59.5 billion, according to data compiled by Bloomberg. That compares with 147 deals valued at $29.3 billion in all of 2006.

Bain has participated in technology buyouts such as last year's 3.4 billion euro ($4.83 billion) acquisition of Royal Philips Electronics NV's semiconductor unit and the $3 billion takeover of Texas Instruments Inc.'s sensors and controls division.

To contact the reporters on this story: Amy Thomson in New York at athomson6@bloomberg.net ; Vivek Shankar in San Francisco at vshankar3@bloomberg.net