Federal government rejects Aecon sale to CCCI
May 24, 2018 – Aecon Group Inc. was informed Thursday that the Governor in Council has issued an order under the Investment Canada Act directing CCCC International Holding Limited (“CCCI”) not to implement its proposed acquisition of Aecon. As a result, the Arrangement between Aecon and CCCI will not proceed.
“While we are disappointed with the government’s decision, Aecon is and will continue to be a leading player in the Canadian construction and infrastructure market,” said John M. Beck, President and Chief Executive Officer, Aecon Group Inc. “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. The deal offered considerable benefits to Aecon and its various stakeholders. While we have been prevented from pursuing the transaction, we are moving forward from a position of strength. Over the past several months Aecon has secured numerous large-scale projects, has a record backlog, and a significant pipeline of opportunities ahead of it.”
Aecon reported a backlog of $4.6 billion at the end of the first quarter, which included $910 million of new contract awards booked in the quarter. Subsequent to the end of the first quarter, Aecon announced that:
- a partnership in which Aecon has a 24 per cent interest finalized a $5.0 billion contract for the Réseau express métropolitain Montréal Light Rail Transit project. The project will add $1.2 billion to Aecon’s backlog in the second quarter of 2018; and
- a consortium in which Aecon has a 33.3 per cent interest in the equity and construction and a 50 per cent interest in the 30-year maintenance agreement, secured the contract for the Finch West Light Rail Transit project in Toronto. Total contract is valued at $2.5 billion, which includes $1.2 billion in construction costs. This project will add $400 million to Aecon’s backlog in the second quarter of 2018.
As previously disclosed in Aecon’s first quarter 2018 results, the Company continues to expect revenue growth and adjusted EBITDA margin improvement in 2018 versus the prior year. The overall outlook is positive with areas of strength in Aecon’s business in infrastructure, nuclear, telecom, gas and power distribution, expected to outweigh the impact of fewer opportunities in commodity and oil related markets. Aecon’s balance sheet continues to be well-capitalized and the Company is confident in its ability to increase capacity as required to facilitate growth.
“We are fortunate to have a strong market position, effective industry partnerships, and outstanding employees, all of which will help drive our future success,” Mr. Beck said.
Aecon will remain publicly traded on the Toronto Stock Exchange and its headquarters will continue to be in Toronto, with regional offices in Calgary and Vancouver. As would have been the case if the transaction had proceeded, management of the company is not expected to change. The company has reinstated its search for a new Chief Executive Officer. Mr. Beck will remain as CEO until his successor has been selected.
“Our dedicated board of directors, who were recently re-elected at Aecon’s May 10PthP Annual General Meeting, remain committed to providing ongoing guidance and governance to drive shareholder value and work in the best interest of the Company,” said The Hon. Brian V. Tobin, P.C., O.C., Aecon’s Chairman. “The board is also focused on the ongoing CEO search to select the right leader to guide the company in the future.”
The Special Committee of the Board of Directors has been dissolved and, while Aecon’s Board considers strategic options in the best interest of the Corporation from time to time, Aecon is no longer actively pursuing a sale process.
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Minister Bains statement on CCCI’s proposed acquisition of Aecon
The Honourable Navdeep Bains, Minister of Innovation, Science and Economic Development, made the following statement on the proposed acquisition of Aecon Group Inc. (Aecon) by China Communications Construction Company International Holding Limited (CCCI):
“In accordance with the Investment Canada Act, the Government of Canada reviewed the proposed acquisition of Aecon by CCCI.
“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.
“Based on their findings, in order to protect national security, we ordered CCCI not to implement the proposed investment.
“Our government is open to international investment that creates jobs and increases prosperity, but not at the expense of national security.”