Telecommie prevented from investing in US network security firm

The parties:

Huawei Technologies -- a telecom with strong ties to the Chinese government

3Com, based in Marlborough, Mass., which supplies network security services to the U.S. Defense Department.

Bain Capital Partners LLC, a US private equity firm

CFIUS (Committee on Foreign Investment in the U.S.), an agency led by the Treasury Department that can recommend that the president block foreign acquisitions on national-security grounds; an organization founded in 1975 by President Ford in response to public furor over Arab oil money

The deal: Bain would pay $2.2 to buy out 3Com. Huawei would pay (how much?) to buy out 20% of Bain. Huawei was crucial to Bain securing 3Com; the deal simply would not make since without the telecommie commitment. Why?

NO DEAL: The Pentagon believes that hackers in China conducted a massive cyber attack on its systems last year. 3Com Corp. said it couldn't reach an agreement with CFIUS on national security issues. Bain said last week it offered the federal government several concessions to get national security approval. Bain and 3Com have told federal officials that they would not give Huawei any operational control or ability to make decisions for 3Com if the deal goes through.

The bane in the spin: "Some industry groups worry free-trade efforts will be worn down by growing protectionist fears in many sectors of the economy."

The source: A WALL STREET JOURNAL ONLINE NEWS ROUNDUP