March 20 (Bloomberg) -- Bain Capital Partners LLC and its Chinese partner abandoned a $2.2 billion bid for 3Com Corp. after failing to agree to new terms that would satisfy U.S. government concerns over national security. 3Com shares fell 11 percent.

The Committee on Foreign Investment in the U.S. had planned to block the deal, which would have given Huawei Technologies Co. 16.5 percent of 3Com, Bain said today in a statement. Some U.S. lawmakers objected to the bid because it would have put 3Com's anti-hacking technology, used by the Pentagon, in Chinese hands.

The end of the deal leaves 3Com, which hasn't posted an annual profit since 2000, to fend for itself against Cisco Systems Inc., which dominates sales of networking equipment. 3Com's stock has fallen 60 percent since Bain announced the bid Sept. 28, wiping out more than $1 billion in market value.

3Com, based in Marlborough, Massachusetts, dropped 24 cents to $1.98 at 4 p.m. New York time on the Nasdaq Stock Market. The shares declined 22 percent yesterday after the company said it hadn't yet reached a revised accord with Bain, a Boston-based buyout firm.

``Bain Capital made several alternative proposals to 3Com that we believe could have satisfied the concerns raised by CFIUS,'' the firm said. ``We regret that we were unable to agree upon an alternative transaction.'' Bain scrapped a request for approval of the buyout from the U.S. government on Feb. 20.

Kevin Flanagan, a spokesman for 3Com, didn't immediately return a call seeking comment. Bain representative Alex Stanton declined to comment. Ross Gan, a spokesman at Shenzhen, South China-based Huawei, declined to comment.

3Com Responds

In a Business Wire statement released tonight, 3Com said Bain's ending of the agreement was not valid and the reasons given were not grounds for termination.

``3Com will continue to fulfill its obligations under the terms of the existing merger agreement while it pursues the $66 million termination fee payable under the merger agreement,'' 3Com said in the statement.

The company also said it intends to proceed with its shareholders' vote tomorrow on the original acquisition agreement. Shareholders' approval ``is a condition to seeking the breakup fee payable under the merger agreement,'' 3Com said.

Analysts including Morningstar Inc.'s Alex Dannin had said the companies might win approval for the deal if Bain sold 3Com's TippingPoint unit, which makes the firewalls the Pentagon uses to secure its networks. 3Com had planned to spin off the division before agreeing to the offer from Bain and Shenzhen-based Huawei, founded in 1988 by former Chinese army officer Ren Zhengfei.

Ethernet Inventor

3Com was founded in 1979 by Robert Metcalfe, who invented the Ethernet technology that is now the standard for personal- computer networks. In 1987, 3Com merged with Bridge Communications, which was co-founded by Eric Benhamou, now 3Com's chairman.

The company sold shares to the public in 1984 and reached a peak market value of $25.8 billion in 2000, with the stock climbing to a split-adjusted record of $21.89. 3Com shed its Palm electronic-organizer business, now Palm Inc., in 2000.

3Com plans to report third-quarter results on March 24.

To contact the reporter on this story: Vivek Shankar in San Francisco at vshankar3@bloomberg.net

Last Updated: March 20, 2008 22:34 EDT