UPDATED: This story was updated on 25 May to include CCCI’s response to the Canadian government’s decision.
The Canadian government has blocked a proposed CAD 1.51bn (USD 1.17bn) takeover of construction firm AECON Group by China Communications Construction (CCCC) on national security grounds.
This decision is “disappointing,” a source at the China Communication Construction International (CCCI), the overseas investment platform under the state-owned infrastructure giant, told Inframation on Friday(25 May).
“CCCI believed in the strong commercial merits of this transaction, which stood to deliver considerable economic benefits to Canada,”she said in an email.
The Chinese firm has respectfully followed the government’s review process in the spirit of openness and transparency, and met every requirement and request for information, the source noted.
“While this is not the outcome we wanted,”she said. “CCCI will continue moving forward on other exciting opportunities around the world.”
Canadian Prime Minster Justin Trudeau’s Cabinet issued an order under the Investment Canada Act asking CCCI’s not to proceed with the proposed buyout of Aecon. This is in view of the advice of the country’s national security agencies throughout the “multi-step national security review process,” according to a statement issued on Wednesday (23 May) by Innovation Minister Navdeep Bains.
“Based on their findings, in order to protect national security, we ordered CCCI not to implement the proposed investment,” the statement said,
The government’s decision was later confirmed by Aecon, which said in a press release that its chief executive John Beck was “disappointed” with the government’s decision.
“The deal offered considerable benefits to Aecon and its various stakeholders,” Beck said.
The Aecon transaction would have been the largest acquisition outside of Canada’s oil sector by a Chinese state-owned enterprise, according to the University of Alberta’s China Institute.
The Toronto-based firm will remain publicly-traded, while the company said Beck will remain as chief executive until his successor has been selected.
Aecon is no longer actively pursuing a sale process.
CCCI announced its plan to acquire the Canadian builder in October last year after the Canadian firm was put up for sale in August. Aecon shareholders have approved the sale and the Commissioner of Competitor has issued a “no action” letter with respect to the proposed transaction.
Yet the completion of the deal was pushed back in February this year after the Canadian authorities extended a national security review for up to 90 days.
An opponent of the transaction is the Conservative Party’s Tom Kmiec, MP. In three House of Commons appearances in February Kmiec argued that CCCI had been banned by the World Bank from bidding on construction projects. He said CCCI has rigged bids in the Philippines and been banned by the Bangladesh government for corruption and bribery. He also outlined the national security risk associated with Aecon’s maintenance contract with Bell Canada for fiber optic migration.
Under the national security provisions of the Investment Canada Act, decisions and orders of Cabinet or decisions of the Minister are final and binding. Except in the case of judicial review under the Federal Courts Act, they are not subject to appeal or review by any court.
CCCI bought Australian contractor John Holland in 2015 for AUD 1.15bn (USD 870m).
The Beijing-based multinational also formed a consulting and planning services JV with US engineering firm AECOM in August last year.