Canadian Manufacturing

Ottawa to scrutinize China firm’s takeover of Toronto-based Aecon ‘very carefully’

CCCC Ltd. was barred from involvement in World Bank construction projects for eight years due to fraudulent practices. Analysts expect the deal to go through, but they pointed to Aecon's nuclear business as one obstacle

October 27, 2017  by David Hodges, The Canadian Press

In its 140-year history, Aecon has been involved in landmark construction and engineering projects, including the CN Tower, Vancouver’s SkyTrain and the Halifax Shipyard

TORONTO—The CEO of Aecon Group Inc. says its $1.5 billion acquisition by one of the world’s largest engineering and construction groups will level the global playing field for the Canadian construction company, but regulatory approvals must be met before the takeover by the controversial Chinese firm goes through.

China Communications Construction Company Ltd. said on Oct. 26 it has agreed to pay $20.37 per Aecon share in cash to buy Aecon, which said in August that it was looking for potential buyers.

The offer requires the approval of two-thirds of the votes cast at a special meeting of Aecon shareholders as well as government and regulatory approvals under the Investment Canada Act, the Canadian Competition Act and authorities in China.

CCCC Ltd. was barred from involvement with any World Bank construction projects for eight years until recently for fraudulent practices in the Philippines.


“We can confirm that CCCC’s proposed acquisition of Aecon will be subject to review under the Investment Canada Act,” said Karl Sasseville, press secretary to Innovation Minister Navdeep Bains.

“The proposed acquisition, like all significant foreign investment transactions, will be reviewed on its merits based on the overall economic benefit for Canada.”

Prime Minister Justin Trudeau said on Thursday that the Aecon takeover deal “will be examined very carefully by the Investment Canada Act to ensure that safety and security is not being compromised and to ensure that it is in the net benefit of Canadians.”

In terms of regulatory approvals, RBC Dominion Securities analyst Derek Spronck said he believes Aecon’s only potential obstacle could be its significant nuclear work in Canada.

“We do not believe there would be any issues with a foreign buyer acquiring these assets, and if there are, we believe (Aecon) would be able to sell off the nuclear segment easily,” he said.

“Bids from Chinese competitors would not be viewed too positively by Canadian regulators given (Aecon’s) CANDU work, but the nuclear work could potentially be carved out during the sale process,” added CIBC analysts in a separate note.

Aecon CEO John Beck said he has no reason to believe the takeover will not go through. “We’ll follow all the rules. We’re expecting approvals every step of the way,” he said.

With the acquisition deal, Beck said Aecon will continue to be headquartered in Canada while CCCC Ltd.’s size and financial strength will help it bid for larger and more complex projects.

“We have a long history of international projects that we’ve done, but we’ve always done one or two at a time—never more,” he said.

“We have expertise that is recognized around the world that we’ll now be able to deploy more effectively, which means more jobs and more opportunities for Aecon based here in Canada.”

In its 140-year history, Aecon has been involved in landmark construction and engineering projects, including the CN Tower, Vancouver’s SkyTrain and the Halifax Shipyard. It currently has major contracts for Toronto transit and nuclear refurbishment, among others.

Beck says the company has $25 billion- to $35-billion worth of business in the pipeline right now that it’s bidding on. “So we want to be ready and we want to have the financial muscle to be able to compete with the international firms,” he said.

Aecon shares advanced $3.21, or 19.43 per cent, to $19.73 at the close of markets Thursday.

The announcement of the deal comes at a challenging time for Aecon, which has seen its value take a major hit from the drop off in energy and mining projects due to a commodities downturn in recent years.

Spronck said in a note to clients that he sees Aecon’s acquisition price as “attractive, given the challenging operating results.”

“While we thought a sale could be challenging, we did see a foreign buyer as the more likely option,” he said.

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