The Wall Street Journal reports today that traders were buying call options in 3Com shares at heavier-than-usual volumes yesterday.
The WSJ quoted Stacey Briere Gilbert, chief options strategist at Susquehanna Financial Group, who said traders were picking up options that allow them to buy the stock for $5, but with no apparent timeline in mind. Traders bought large amounts of calls that expire in November, December, and January.
Since 3Com isn’t due to report earnings again until December, the relative call-buying frenzy likely is related to the private-equity bidding war for the H-3C joint venture owned by 3Com and China’s Huawei Technologies Co.
Bids for H-3C, in which 3Com holds a 51-percent stake, have reached $1.5 billion to $2 billion, according to people familiar with the matter.
Originally, three private-equity firms were involved in bidding for H-3C, but the WSJ reported yesterday that Texas Pacific Group had withdrawn from the competition. Silver Lake Partners and Bain Capital Inc. are still in the running, with Bain said to be offering the higher bid.
3Com would like to buy out the balance of H-3C that it doesn’t own, but it doesn’t have the financial resources to compete against the financial heft of Silver Lake or Bain. Accordingly, 3Com has begun discussions with other private-equity firms in a bid to seek financial backing for its plan to take complete control of the joint venture.