Canadian government bars Aecon’s takeover by Chinese government owned contractor

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The federal cabinet has blocked the proposed $1.5 billion takeover of Toronto-based Aecon by a Chinese-government owned company, citing national security threats.

The decision follows extensive lobbying by other businesses in the Canadian construction industry, represented in part by the Canadian Construction Association (CCA), which asserted that the state ownership of the business would create unfair advantages to the foreign business.

The decision against the takeover by China Communications Construction Co. Ltd. follows a national security review that the Globe and Mail reports determined was not in Canada’s national security interest.

The newspaper reported:

Intelligence agencies in both Canada and the United States have warned that companies owned or partly owned by the Chinese government are not merely profit-seeking operations; they are also prone to passing on information or technology to Beijing and making business decisions that could conflict with Canadian interests but serve the agenda of the authoritarian Communist Party of China.

“Our government is open to international investment that creates jobs and increases prosperity, but not at the expense of national security,” innovation minister Navdeep Bains said in a statement.

Aecon reported to investors that it is reviewing the decision and will have a “more detailed response in due course.”

“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,” Aecon chief executive officer John Beck said in a statement.

“While we have been prevented from pursuing the transaction, we are moving forward from a position of strength.”

Ward Elcock, a former CSIS director who had urged for the deal to be rejected, welcomed Ottawa’s decision, the Globe and Mail reported.

“A state-owned company will always do the bidding of China,”Elcock said in an interview with the newspaper. “At the end of the day, China is not an ally of Canada. It is a trading partner – and a crucial one. … But having said that, the interests of China are not always going to be the interests of Canada.”

He said the problem with allowing Aecon to be purchased by a Chinese state firm is that the Canadian company plays a significant role in major infrastructure projects, from the refurbishment of nuclear facilities to British Columbia’s massive Site C hydro-electric dam. Mr. Elcock said he thinks the difficulty facing federal decision-makers was that they couldn’t fashion a workable constraint on Aecon’s future activities under Chinese state ownership.

“The problem, I suspect, is there is really no way to put in a restriction that prevents a company that simply pours concrete one day from undertaking a major infrastructure project on another day,” he said.

The Chinese embassy in Ottawa said the decision will hurt Canada’s economy. “There is no doubt that the decision made by Canadian government is by no means a good news for the investment co-operation between China and Canada,” the embassy said in a statement.

“This will seriously undermine the confidence of Chinese investors.”

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