As China’s Ministry of Commerce (MOFCOM) continues its review into HP’s pending acquisition of 3Com, I am attempting to get more information on how the MOFCOM process works and what conclusion the ministry might reach.
After doing some digging, I know more about how MOFCOM operates, what its current priorities seem to be, and how it has resolved previous acquisition reviews. Still, I would not want to wager heavily on the outcome of HP’s 3Com purchase. It should go through, but MOFCOM remains a significant wildcard, consistent in some respects but seemingly arbitrary in others.
If you care to learn more about MOFCOM, how it’s handled recent cases, and how it has become more assured and ambitious in its rulings, I direct you to the MOFCOM website. a recent article on MOFCOM from law firm Sidley Austin, another from law firm Allen & Overy LLC, and a third article (which appeared at The Deal’s website) by lawyers in the employ of Weil Gotshal.
None of those law firms was involved in the HP-3Com deal. That transaction was handled by Cleary Gottlieb Steen & Hamilton, which represented HP, and by Wilson Sonsini Goodrich & Rosati, which acted on behalf of 3Com.
Separate from the deliberations of MOFCOM, another piece of news surfaced this week that might have implications for HP and 3Com. According to a Reuters report that quotes market researcher Zpryme, China will invest $7.3 billion on smart-grid technology and services this year. Moreover, China could spend more than $100 billion upgrading its power-infrastructure in the next decade, according to Yuanta Securities analyst Min Li.
Why, you ask, is that relevant to HP and 3Com? As Cisco knows, realization of the smart grid involves deployment of two-way communications and network infrastructure. Meanwhile, in an IDG News Service story that hit the wires just after HP and 3Com announced the acquisition, we learned that 3Com has a strong presence in Chinese energy sector. To wit (quoting from the aforementioned IDG story):
One area where HP may increase its focus after the 3Com deal is China’s energy sector, said Adam Jura, a senior analyst at Ovum. Gear from H3C is used in Chinese backbone networks including those for its energy and transportation sectors, giving 3Com strong ties in those areas, said Jura. HP could benefit, for instance, from potential smart power grid projects in China spurred by government funding, he said.
If 3Com can hold off Huawei, its former H3C partner, and repel Cisco’s push into China’s smart grid, 3Com and HP could benefit significantly from China’s energy-related splurge.