Canada Blocks Chinese Takeover of Construction Company Aecon
Did Trudeau put Canada first or ruin Chinese-Canadian relations?
Key Actors:
- Federal Government of Canada – led by Prime Minister Justin Trudeau
- Aecon Group Inc. – 141 year old company involved in many of Canada’s largest infrastructure projects
- China Communications Construction Co. – 64% owned by the Chinese government and one of the biggest construction companies in the world
- Investment Canada – body conducting the National Security Review
Background:
In recent years, China’s influence in the developed world has increased significantly. With their One Belt One Road initiative, they have supported many major infrastructure, entertainment, and energy projects in North America by investing millions of dollars into North American companies. Though the Chinese government does not gain a significant profit from these investments, their support has increased western dependance on them, thus expanding their political influence. From Canada, Australia, and the U.K., there have been numerous allegations surfacing against China for influence peddling and political bribery, sparking unease in their continued investments.
What’s going on?
Aecon is a major construction company based in Toronto. They have participated in many large scale Canadian infrastructure projects including the CN Tower, the Saint Lawrence Seaway, Vancouver’s Skytrain and the Halifax Shipyard. A few months ago, the China Communications Construction Co. (CCCC) proposed an $1.51 billion acquisition of this company, which was welcomed by Aecon shareholders as the CCCC was offering 23% more than the market price. However, Aecon has been awarded multiple sensitive government contracts and is also in charge of building and refurbishing nuclear energy plants. These concerns brought about much pressure from the Conservative party and critics, both calling for a National Security Review. After a thorough investigation by Investment Canada, the federal government has taken their recommendation to block the takeover and ordered the CCCC give up their proposed investment.
Potential Effects:
The Chinese government was heavily in support of this investment, stating that it was purely for business purposes. The federal government’s decision could be detrimental to Chinese-Canadian relations and potentially undermine future Chinese investment in Canada.
Aecon was also disappointed. Their shares dropped to a 10 month low and the blockage of the acquisition could make Aecon less competitive against other corporations in the Canadian market. Others state that no state owned corporation, whether it be from China or any other country, should be questioned in trying to purchase a Canadian firm. Furthermore, according to Canada’s Innovation Minister, Canada is still open to trade talks with China, though negotiations will likely be more complicated after this decision. The Canadian government continues to be in a difficult position of trying to maintain good trade relations with China while protecting sensitive assets from becoming tools to a geopolitical maneuver.
Statistics:
- The investment by the CCCC was worth $1.51 billion
- Aecon’s stock dropped by 15% following the announcement by the federal government
- The CCCC has invested nearly $1.8 trillion from 2005-2017 around the world
Bibliography:
“Canada Still Interested in Trade with China after Killing Aecon Deal: Bains | CBC News.”CBCnews, CBC/Radio Canada, 24 May 2018, www.cbc.ca/news/politics/bains-trade-china-aecon-1.4676139.
Blatchford, Andy. “Canada Blocks Aecon Takeover by Chinese State-Owned Firm over National Security.” National Post, 24 May 2018, nationalpost.com/pmn/news-pmn/canada-news-pmn/newsalert-ottawa-blocks-aecon-proposed-takeover-by-chinese-group.
Snyder, Jesse. “Aecon a ‘Stepping Stone’ for Beijing: Fears Rise as Ottawa Decides on $1.5-Billion Deal.” Financial Post, 6 Feb. 2018, business.financialpost.com/investing/aecon-a-stepping-stone-for-beijing-fears-rise-as-ottawa-decides-on-1-5b-deal.
Snyder, Jesse. “Aecon Deal with China Poses ‘Significant Risk’: Security Expert.” New Study Calls Average Water Use by Canadians ‘Alarming’, www.nationalpost.com/aecon+deal+with+china+poses+significant+risk+security+expert/17337854/story.html.
“Federal Government Blocks Sale of Construction Giant Aecon to Chinese Interests | CBC News.” CBCnews, CBC/Radio Canada, 24 May 2018, www.cbc.ca/news/politics/canada-blocks-aecon-sale-china-1.4675353.
Reuters. “Canada Blocks Chinese Takeover of Aecon over National Security Concerns.” The Guardian, Guardian News and Media, 24 May 2018, www.theguardian.com/world/2018/may/24/aecon-takeover-blocked-china-canada.
http://business.financialpost.com/news/chinese-takeover-of-aecon-blocked-on-security-grounds