Review under Canada Investment Act is one of last hurdles for the deal
The $1.5-billion takeover of Canadian construction company Aecon Group Inc. by a division of a Chinese state-owned company has been pushed back after Ottawa ordered a national security review of the deal.
Aecon revealed the delay Monday, prior to the opening of stock markets. The company said the outside date for completing the takeover plan with CCCC International Holding Ltd., has been pushed back to March 30 from the original February 23.
"Both companies remain committed to working with the Investment Review Division to obtain approval of the transaction," Aecon said.
The company said it received notice from the minister of innovation, science and economic development indicating that the federal cabinet has ordered the 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 "
Last week, the opposition Conservative Party pushed the Liberal 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," Conservative MP Tony Clement said in the House of Commons.
"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?" Clement said.
On Friday, Aecon CEO John Beck responded that Aecon offers construction and refurbishment support to clients in the nuclear industry but the company 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 has already cleared most of its hurdles, after receiving the approval of Aecon shareholders, court approval and clearance from Canada's competition regulator. Aecon said the deal only needs clearance under the Investment Canada Act and some normal closing conditions.
The 140-year-old company has worked on several Canadian landmarks including the CN Tower, Vancouver's SkyTrain and the Halifax Shipyard.
CCCC International, also known as 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.
CCCI is not without controversy. The World Bank banned it from bidding on construction projects for eight years until January 2017 due to a bid-rigging scandal in the Philippines. The state-owned company has also been linked to the construction of artificial islands in the South China Sea, which has created high tension between China and several Asian countries.
In Bangladesh, another subsidiary of CCCC is reported to have been blocked from government contraction over allegations of offering bribes to officials.