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Tuesday, October 23, 2007

3Com -- The Proxy Statement

3Com filed its preliminary proxy statement yesterday.  After having read through it I still can't determine whether the deal is conditioned on clearance by CFIUS under the Exon-Florio amendment (for more on this see here).  In the description to the merger section 3Com states that the merger is conditioned upon: 

any waiting period (and any extension thereof) under the HSR Act shall have expired or been terminated, any waiting period (and any extension thereof) under the antitrust laws of various other jurisdictions shall have expired or been terminated, and clearances, consents, approvals, orders and authorizations from certain government authorities shall have been obtained . . . .

The only other disclosure on this matter in the proxy is this:

The parties have agreed to make a joint voluntary filing of the transaction with the Committee on Foreign Investment in the United States (“CFIUS”).

Except for these filings and the filing of a certificate of merger in Delaware at or before the effective date of the Merger, we are unaware of any material federal, state or foreign regulatory requirements or approvals required for the execution of the Merger Agreement or completion of the Merger.

This would imply that, under the above condition, Exon-Florio clearance is indeed required for the merger to go through.  But my conclusion is only an inference.  Given the controversy this deal is generating and congressional interest on this point, I can't believe that 3Com's counsel Wilson, Sonsini would draft such intentionally non-descript disclosure.  I do believe that this failure is a material omission under the federal securities laws and I hope the SEC reviews the proxy and comments upon this forcing 3Com to clairfy the issue  (Note well shareholder class action attorneys who are currently suing 3Com in Delaware and Massachusetts).  I am suspect of the congressional interest in this deal and the hostility Congress sometimes displays to foreign investment, but I believe 3Com is not helping its case here. 

http://lawprofessors.typepad.com/mergers/2007/10/3com----the-pro.html

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Comments

> This would imply that ,,, Exon-Florio clearance is indeed required for the merger to go through. But my conclusion is only an inference. Given the controversy this deal is generating and congressional interest on this point, I can't believe that 3Com's counsel Wilson, Sonsini would draft such intentionally non-descript disclosure. <

what does Exon-Florio say about CIFIUS review by 'passive' shareholders with positions of less than 20% ?

my suspicion ,,, Exon-Florio is geared to foreign-majorities holdings, exception being television industry, where FCC regs limit foreign ownership to 25% (ref - Univision)

if Exon-Florio is silent for passive holdings below 20%, Wilson, Sonsini should be excused for following the law, instead of the politics

Posted by: Mike | Oct 24, 2007 10:34:33 AM

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