Feds block Aecon takeover by Chinese state-owned firm over national security

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Lu Shaye, China's ambassador to Canada, has said it is "immoral" to criticize the takeover of Canadian firms by Chinese state-owned enterprises because the critics are attempting "to weaken the competitiveness of Chinese enterprises by defamation".

The acquisition of Aecon by the Chinese firm had already cleared most hurdles after the deal was backed by Aecon shareholders, and received court approval and clearance from Canada's competition regulator.

The potential deal was worth $ 1.5 billion.

"We listened to the advice of our national security agencies throughout the multi-step national security review process under the Investment Canada Act".

The Committee on Foreign Investment in the United States (CFIUS), which scrutinizes foreign purchases of US assets to protect national security interests, has been tightening scrutiny of Chinese companies' acquisitions of American companies under the Trump administration.

A months-long national security review by Canada's intelligence agencies examined CCCI's record around the world and its other, similar transactions and found there was seller's remorse in other jurisdictions, the source said.

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Since its creation, Aecon has been involved in the construction of some of Canada's most iconic landmarks, including the CN Tower, St. Lawrence Seaway, Vancouver Sky Train and the Montreal's Trudeau International Airport.

Analysts suggest that the Trudeau government only rejected the CCCI deal to appease the combative and erratic Trump administration, which might have viewed the Aecon sale to China as a threat to NAFTA. The deal had offered "considerable benefits", but the company will now move forward, including by reinstating a search for a new CEO, the statement said.

Wark said the government made the correct decision and possible retaliation from the Chinese government depends on how the decision is explained to them by Ottawa.

The Canadian government's rebuff deals a blow to CCCC's global expansion drive, which has seen the Beijing-based firm - ranked as a top-three worldwide contractor by Engineering News-Record last year - invest or commit over $1.9 billion on major overseas projects in recent years.

The company said it was disappointed with the government's decision and will continue to be a leading player in the Canadian construction and infrastructure market.

The Chinese embassy in Canada reportedly reacted by warning the decision would "seriously undermine the confidence" of investors. "We express the regret and disappointment at this decision". Despite the decision, he said the Chinese government would stay committed to deepening its co-operation with Canada.

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Lu has said in past media interviews that China would accept a rejection of the deal, but said it would expect from Canada a detailed rationale for the decision.

"From your side, you have your rules and regulations on the foreign companies overtaking Canadian companies. The Chinese side does not want to interfere (with) it". It's also possible that down the road, a Trudeau government would "remove restrictions on Chinese state investment in Canada and cease to engage with China on human rights violations or criticize China's global policy".

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.

The Infrastructure Canada memo said CCCC generated revenue of US$62 billion in 2016 and has core business activities that include the construction of ports, roads, terminals, bridges, rail and tunnels.

Aecon is the lead contractor in a consortium that was awarded a contract in December 2017 to build the spillway and generating station for the Site C dam.

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