The Canadian government blocked a proposed takeover of construction firm Aecon Group Inc by a unit of China Communications Construction Co Ltd (CCCC, 中國交通建設) in the latest move by Western nations weighing national security concerns associated with Chinese investment.
Canadian Prime Minister Justin Trudeau’s government on Wednesday announced the decision after launching a security review of the C$1.2 billion (US$933 million) deal, Minister of Innovation, Science and Economic Development Navdeep Bains said in a statement.
Aecon later confirmed that the takeover offer by CCCC International Holding Ltd (CCCI, 中交國際控股), the overseas investment and financing arm of China Communications, had been rejected.
A CCCC spokesman in Beijing said that the company could not immediately comment.
US President Donald Trump earlier this year blocked Broadcom Ltd’s hostile takeover of Qualcomm Inc because it could “impair the national security of the United States.”
This is the first major foreign takeover blocked by the Trudeau government since he won power in 2015.
“We listened to the advice of our national security agencies throughout the multistep national security review process under the Investment Canada Act,” Bains said in the statement. “Based on their findings, in order to protect national security, we ordered CCCI not to implement the proposed investment.”
Canada is “open to international investment that creates jobs and increases prosperity, but not at the expense of national security,” Bains added.
Beijing-based CCCC is one of the biggest engineering and construction companies in the world and is the largest contractor building projects as part of China’s Belt and Road Initiative across Asia and Africa. Its core businesses include infrastructure construction and design and dredging. It posted revenue of 460.1 billion yuan (US$72.02 billion) last year.
CCCC is also the company responsible for building the atolls used by the Chinese military in the South China Sea and was blacklisted by the World Bank from 2009 to early last year for fraudulent practices.
Aecon operates companies across the mining, infrastructure, energy and services industries, building projects from factories, roads and sewers to theaters, book stores and hotels, according to its Web site.
Shares in Aecon, which helped build Toronto’s iconic CN Tower, have over the past few weeks declined to the lowest since the deal was announced in October on concern that it would be blocked.
Aecon’s construction work includes several sectors that could impact national security, including building out the nation’s telecommunications networks.
Aecon closed at C$17.34 in Toronto trading on Wednesday, 15 percent below the C$20.37 a share offer from CCCC International to acquire the construction firm.
Before the recent declines, there was widespread speculation in Canada that the deal might be approved as Trudeau sought warmer ties with China.
“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,” company president and chief executive John Beck said in a statement late on Wednesday.
The deal offered “considerable benefits,” but the company will now move forward, including by reinstating a search for a new CEO, the statement said, adding that Aecon has “a significant pipeline of opportunities ahead of it.”
A person familiar with the file, speaking on condition of anonymity, said that the government did its due diligence and ultimately followed the advice of Canadian national security agencies that had reviewed the deal and had information that was not publicly available.
Aecon’s project portfolio includes work in sensitive fields, such as telecommunications, nuclear power and military housing and training facilities, University of Toronto law professor Anita Anand said in an interview before the decision was announced.
She had earlier called for it to be blocked.
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