Proposed Acquisition of Aecon by CCCI Blocked on National Security Grounds

  • Proposed Acquisition of Aecon by CCCI Blocked on National Security Grounds

Proposed Acquisition of Aecon by CCCI Blocked on National Security Grounds

The takeover of Aecon by CCCI, part of a Chinese state-owned company, was put on hold in February so the federal government could conduct a national security review of the deal.

"We listened to the advice of our national-security agencies throughout the multistep national security review process" under Canadian law, Navdeep Bains, Canada's Innovation Minister, said in a statement issued to The Wall Street Journal on Wednesday. The Communist Party is deeply integrated at all levels of decision-making in the corporation, which has signed $40 billion worth of contracts in Beijing's worldwide "Belt and Road" infrastructure initiative over the past three years, covering airport construction, highways, deep sea ports, railways and bridges. The previous Conservative government of Stephen Harper had rejected the takeover in 2015 over security concerns. La Presse reported the plans went awry when the federal government forced Beida Jade Bird to undergo a national security review.

"This is not about one country or one transaction". Factors considered include the potential impact of the investment on the security of Canada's critical infrastructure, the potential for transfer of technology with military application and the potential to enable foreign surveillance or espionage.

Aecon chief executive John Beck said at the time that the company provided construction and refurbishment services to the nuclear industry but was not involved in sensitive military installations. He also said that under the Investment Canada Act, each transaction is evaluated based upon its facts and merits.

"We just hope the Canadian side could adopt the same standard for Chinese companies compared with other foreign companies", Lu said.

"This is an example of the kinds of challenges that exist any time one looks to work closer with China, but it's also one that I think we should be continuing to talk about", he said. "In this case, on the basis of the evidence, the federal government made the right decision".

"It begs the question: how many other Chinese or other state-owned enterprises have gone under the radar, under the automatic review limit and have acquired various companies in Canada that could also be considered national security risks?" he said.

Aecon shares plummeted more than 15 per cent on Thursday following Ottawa's decision, ending the day at $14.67 at close, below the $16.60 average over the four months before the deal was first announced past year. Aecon later confirmed the takeover offer by CCCC International Holding Ltd. had been rejected.

Bastien said the price could fall even lower as the stock moves from hedge and arbitrage funds back into the hands of fundamental investors. However, he noted that the company is still in a better position than it was a year ago.

"Takeout or not, we argue the construction giant is a stronger company now than it was prior to the transaction announcement, and will eventually be valued as such", he wrote in a report.

The company announced in October that it had signed a deal to be acquired by CCCC International, but the agreement has been controversial ever since.

CCCI's Beijing-based parent, CCCC, is one of the biggest engineering and construction companies in the world and is the largest contractor building China's Belt and Road Initiative across Asia through to Africa.

Shuvaloy Majumdar, senior fellow at the Ottawa-based Macdoland-Laurier Institute said: "The decision taken by the Canadian government to end the Aecon takeover is laudable, if late, and after an unnecessary flirtation with the People's Republic (of China)". Mr. Beck will remain as CEO until his successor has been selected.