3Com Sets Stage To Pursue Merger Break-Up Fee (COMS)

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3Com Corporation (NASDAQ: COMS) intends to proceed with its currently scheduled shareholder meeting on Friday, March 21, 2008 to enable 3Com shareholders to vote on the company’s existing merger agreement with affiliates of Bain Capital Partners, LLC. 

The board of directors is still recommending that investors vote in favor of the deal.  The sole purpose of the special meeting is to conduct the shareholder vote.  The company does actually note it has the right to pursue a break-up fee under certain circumstances.

The original terms with affiliates of Bain Capital Partners call for $5.30 in cash per share, although even if the group somehow manages to win CFIUS approval that deal may change depending on concessions made.  The parties withdrew their joint merger filing and no application has been re-submitted to date.  So far, the parties have been unable to agree upon an alternative transaction that addresses CFIUS’ concerns and is acceptable to 3Com’s board of directors.

If you read through the release, it seems that 3Com is making every statement in the world that the vote is a mere formality and that it is going to have to stay on its own.  It also sounds like it is going to pursue a break-up fee as a result.  Whether or not a regulatory denial constitutes an event that would qualify for a break-up fee is an entirely different matter, but this seems to be the angle that is at least being set up as a possibility.

Jon C. Ogg
March 19, 2008