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Feb 12, 2018

Ottawa subjects $1.5B Aecon takeover to national security review

Aecon extends timeline on 1.5B takeover


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Aecon Group. Inc. has extended the timeline of its proposed takeover by a Chinese buyer, saying Prime Minister Justin Trudeau’s cabinet is reviewing the deal on national security grounds.

In a statement Monday, Aecon pushed the “outside date” to complete its plan of arrangement with a unit of China Communications Construction Co. to March 30, from Feb. 23, after the government “ordered a continuation of the national security review of the proposed acquisition.” It still expects the deal to close by the end of the second quarter, “assuming the satisfaction or waiver” of remaining conditions.

Investors had been betting a takeover of Aecon Group Inc. is no sure thing, with shares posting their biggest one-week decline since the $1.19 billion offer from a Chinese buyer amid questions of whether the Canadian government will review it on grounds of national security.

Canada’s analysis into whether the transaction is in the country’s “net benefit” had already stretched into overtime. On Monday, Aecon said Trudeau’s government had given notice under section 25.3 of the Investment Canada Act, a passage that allows the government to order a review if it considers the takeover could be “injurious to national security.”

The deal, announced in October, would see Aecon acquired by the Chinese firm for $20.37 a share. The stock ended Friday at $19.50, and traded as low as $19.33 on the day, a gap of 5.1 per cent from the takeover price. The shares fell 2.3 per cent last week, the biggest one-week drop since the deal was announced Oct. 26.

The purchaser filed an application for review on Nov. 9. Once that application is “certified complete,” it begins a 45-day clock for Innovation Minister Navdeep Bains’ office to review the deal, according to a summary of the process provided to shareholders by the company. The government can request an extra 30-day extension for its so-called net benefit reviews of major deals, such as this one, Aecon said. Critically, the deadline can also be extended if the proponent and government agree.

Aecon continues “to respond to officials from the Investment Review Division” in Bains’s office, Chief Executive Officer John Beck  said Friday in another statement. “Aecon welcomes the review on the merits of the proposed transaction and will continue to seek to obtain all the necessary regulatory approvals to close the transaction.”


“We will continue to do our diligence to review the potential national security ‎implications, as we have been doing since day one. We never have and we never will compromise on national security,” the office of Innovation, Science and Economic Development Minister Navdeep Bains wrote in an email to BNN.

Aecon has already cleared one hurdle -- it announced Friday that its takeover was approved by the Canadian Competition Bureau, which later confirmed that it issued a “no action letter” to the company on Dec. 6, 2017, while warning it could still act.

“The bureau concluded that the proposed transaction is not likely to result in a substantial lessening or prevention of competition in the construction and infrastructure industry in Canada,” Competition Bureau spokesman Jayme Albert said Friday in a statement. Canadian law allows “for a one-year period following the completion of a transaction during which the commissioner may bring an application to the Competition Tribunal challenging the transaction.”

Trudeau has courted China, but ties stumbled during a visit by the Canadian leader last year where plans to launch free trade talks fell through.

With files from BNN