Canada blocks China's takeover of Aecon

Contract rejected

Canada blocks China's takeover of Aecon

The federal government's decision Wednesday to block the $1.5-billion acquisition of Aecon Group Inc.by a Chinese state-owned company over matters of national security makes it the latest takeover deal quashed after reviews under the Investment Canada Act.

Under the deal first announced in late October past year, CCCI, the overseas investment platform of state-owned China Communications Construction Company Limited (CCCC), would purchase Toronto-based Aecon Group at a 42 percent premium to Aecon's share price on August 24, 2017.

Aecon added in a statement that the company is no longer pursuing a sale.

"While we are disappointed with the government's decision, Aecon is and will continue to be a leading player in the Canadian construction and infrastructure market", Beck said in a news release.

Canadian Construction Association (CCA) is the national voice for the construction industry in Canada representing over 20,000 member firms in an integrated structure of some 63 local and provincial construction associations.

"I think it will definitely send negative signals to the market, especially it will attack the confidence of the Chinese investors who want to invest in Canada", Lu said.

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"We know Aecon has been awarded numerous sensitive Canadian government contracts, including working with our military and in the nuclear sector".

"Chinese state-owned enterprises - they are not guilty".

Lu Shaye, China's ambassador to Canada, has said it is "immoral" to criticize the takeover of Canadian firms by Chinese state-owned enterprises because the critics are attempting "to weaken the competitiveness of Chinese enterprises by defamation".

"SOEs form an integral part of China's national strategy for global expansion", Duanjie Chen, a senior fellow at the Macdonald-Laurier Institute, said at a recent event in Ottawa. "That is a major reason why China has created monstrous SOEs through internal mergers in the first place".

"I had expected a terse announcement in the summer Parliamentary recess that the national security review had been completed and that cabinet had determined that the takeover could go ahead", Burton said.

Earlier this month, the Chinese conglomerate HNA Group dropped its bid for most of SkyBridge Capital.

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In the wake of the deal, a USA congressional commission pushed for the Pentagon to puts its relationship with Norsat under review, saying Canada's approval of the deal "raises significant national-security concerns for the United States as the company is a supplier to our military".

The acquisition of Aecon by the Chinese firm had already cleared most of its hurdles, after receiving the approval of Aecon shareholders, court approval and clearance from Canada's competition regulator. Trudeau also approved the takeover of Montreal-based ITF Technologies, a fibre-laser technology company, by Hong Kong based O-Net Communications in March 2017, reversing a decision by the former prime minister to block the deal. Aecon has several contracts to install and maintain various telecommunications lines with Bell Canada, some of which traverse the Canada-U.S. border.

"In the current scenario, we believe shares could trade as low as 3.75x forward EBITDA, implying a fair value of $13", Chris Murray, managing director at AltaCorp said in a note to clients. But this was delayed after Canada extended a national security review.

OTTAWA-Canada's Liberal government said Wednesday that it would block a almost billion-dollar Chinese-led deal for a construction company on national-security grounds.

What happens to trade talks? China rejected those clauses outright and suggested Canada stick with economic and trade-based discussions.

Ottawa announced a full national security review of the transaction in February as experts urged the government to proceed cautiously when weighing any investment bids by Chinese state firms and to be as transparent as possible in reviewing the proposed deal.

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The opposition Conservatives and New Democrats had also loudly demanded the national security review.

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