The federal government has blocked the sale of Canadian construction company Aecon Group Inc. to Chinese interests, citing national security.
The controversial deal between Aecon and China’s CCCC International Holding Ltd., also known as CCCI, would have been worth $1.5 billion.
“As is always the case, we listened to the advice of our national security agencies throughout the multi-step national security review process under the Investment Canada Act,” Innovation Minister Navdeep Bains said in a statement Wednesday.
“Based on their findings, in order to protect national security, we ordered CCCI not to implement the proposed investment.”
The statement did not explain what specific threats to Canada’s national security surfaced during the review.
The news was first reported by forexlive.com and BNN Bloomberg.
Before news emerged of the government’s decision, shares of Aecon Group rose nine cents to close Wednesday at $17.34 on the Toronto Stock Exchange.
The $1.5-billion takeover of the Canadian construction company by CCCI, a division 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.
Aecon said at the time it had received notice from Bains’ office indicating that the federal cabinet had ordered a continuation of the national security review under section 25.3 of the Investment Canada Act.
That section allows the government to order a review if the minister “considers that the investment could be injurious to national security.”
“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,” said John Beck, president and CEO of Aecon.
Beck said that while the sale of Aecon is now dead, his company has “secured numerous large-scale projects” and has “a significant pipeline of opportunities ahead of it.”
David Lametti, parliamentary secretary to the minister of innovation, said he believes the deal is now dead.
“My understanding is it’s done,” he said.
Conservative MP Tony Clement — a vocal critic of the takeover deal — welcomed the decision, telling reporters he is glad the federal government listened to its national security advisers.
“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.
Clement said any purchase of a Canadian firm by a state-owned enterprise — whether it’s Chinese, Russian, Saudi or from some another country — should be questioned.
“If they are making investments, first of all they are not making investments necessarily based on market decisions because they are directed by a country, directed by a state. They could be making those investments for strategic or political reasons,” he said.
Pushing for a review
The Conservatives had been pressing the Trudeau government for a formal national security review of the takeover.
“The Chinese company poised to take over Canadian construction giant Aecon is rampant with corruption and has just been blacklisted by Bangladesh for that very reason,” Clement said in the House of Commons in February.
“We know Aecon has been awarded numerous sensitive Canadian government contracts, including working with our military and in the nuclear sector. When Bangladesh is sounding alarm bells, why is Canada staying silent and not calling for a full national-security review of the takeover of Aecon?”
Aecon’s Beck said at the time that the company offers construction and refurbishment support to clients in the nuclear industry but is not involved in sensitive military installations, nor does it own any intellectual property or sensitive proprietary technology related to nuclear energy.
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.
The 140-year-old company has worked on several Canadian landmarks, including the CN Tower, Vancouver’s SkyTrain and the Halifax Shipyard.
CCCI is the overseas investment and financing arm of China Communications Construction Company Ltd. (CCCC), one of the world’s largest engineering and construction groups. CCCC is 64-per-cent owned by the Chinese government.
The World Bank banned CCCI from bidding on construction projects for eight years until January, 2017 due to a bid-rigging scandal in the Philippines.
The state-owned company also has been linked to the construction of artificial islands in the South China Sea — work which has led to heightened tensions between China and several other Asian countries.
What happens to trade talks?
Stewart Beck, CEO of the Asia Pacific Foundation — an independent not-for-profit think tank on Canada/Asia relations — said the government’s decision could complicate future trade talks with China.
“First and foremost you have to respect the security establishments decision,” Beck told CBC News. “I guess from my perspective it’s going to create some problems down the road in terms of negotiating a free trade agreement with the Chinese.”