The federal government has blocked the proposed $1.5-billion takeover of Aecon Group Inc. by a Chinese state-owned company for reasons of national security.
After markets closed Wednesday, Economic Development Minister Navdeep Bains confirmed the government's decision to prevent CCCC International Holding Ltd. (CCCI) from acquiring the Aecon construction firm.
The Trudeau government had been warned by experts to proceed cautiously when weighing any investment bids by Chinese state firms and to be as transparent as possible in reviewing the proposed deal.
The federal government announced a full national security review of the Aecon deal in February.
"As is always the case, we listened to the advice of our national security agencies throughout the multi-step national security review process under the Investment Canada Act," Bains said in a statement.
"Based on their findings, in order to protect national security, we ordered CCCI not to implement the proposed investment," he said. "Our government is open to international investment that creates jobs and increases prosperity, but not at the expense of national security."
Aecon has a long history of participation in Canadian construction and engineering projects such as the CN Tower, Vancouver's SkyTrain, the St. Lawrence Seaway and the Halifax shipyard.
In a statement Wednesday evening, the Toronto-based firm said it was disappointed with the government's decision.
"Aecon is and will continue to be a leading player in the Canadian construction and infrastructure market," John Beck, Aecon president and CEO, said in the statement.
"Through our proposed transaction with CCCI, we had outlined a vision in which Aecon would be better able to compete with the many large global construction companies actively working in Canada."
A representative of CCCI, which is a subsidiary of China Communications Construction Company Ltd. (CCCC), said Wednesday that it had no immediate comment about Canada’s decision to block the takeover.
The Chinese government had been highly supportive of the potential Aecon takeover.
It remains to be seen how the federal government’s decision will be received by Beijing and how it could affect Canadian-Chinese relations.
Last month, China's ambassador to Canada defended the proposed deal. Lu Shaye said there was no reason for concern about the acquisition of Aecon because the Chinese side was strictly focused on business and market interests.
"My first impression, to tell you the truth, (is) that I think the Canadian media or the Canadian public is too sensitive about the Aecon case because Aecon is just a construction company," Lu said in response to a question about the takeover bid during a news conference at the Chinese embassy in Ottawa.
"From your side, you have your rules and regulations on the foreign companies overtaking Canadian companies. I think for the national security issue it is your internal affairs. The Chinese side does not want to interfere (with) it."
Lu, who spoke through an interpreter, added that China just wants to ensure Canada has the same standards for Chinese companies as it does for foreign companies from other countries proposing to take over Canadian firms.
An internal federal document prepared last fall described CCCC as one of the world's largest engineering and construction firms.
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, it continued, generated revenue of $3.2 billion in 2016.
The briefing document was obtained recently by The Canadian Press under the Access to Information Act.