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Canada blocks Chinese company's takeover of Aecon on security grounds

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Canada blocks Chinese company's takeover of Aecon on security grounds

The Canadian government on May 23 said it was blocking a proposed takeover by a unit of China Communications Construction Co. Ltd. of construction firm Aecon Group Inc. on national security grounds.

The C$1.2 billion proposed takeover by CCCC International Holding Ltd. marks the first major foreign deal blocked by Canadian Prime Minister Justin Trudeau since he took power in 2015, Bloomberg News reported.

The decision followed the government's security review of the deal, Innovation Minister Navdeep Bains said in a statement.

"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 the statement. "Based on their findings, in order to protect national security, we ordered CCCI not to implement the proposed investment."

Canada is "open to international investment that creates jobs and increases prosperity, but not at the expense of national security," Bains added.

Shares of Aecon, whose construction work spans several sectors including telecommunications and energy, have fallen about 3.8% in April amid market concerns that the deal would be blocked. Shares closed up 0.52% to C$17.34 in Toronto trading on May 23.

The closing share price was 14% below the C$20.27-per-share offer from CCCC International Holding to acquire the construction firm, Bloomberg said.

John Beck, Aecon president and CEO, in a May 23 statement said the company was "disappointed" with the decision as the deal offered "considerable benefits" and would have improved its competitiveness in Canada. The company added that it will no longer actively pursue a sale process and will restart its search for a new CEO. Aecon shareholders approved the takeover deal in December 2017.

Transportation infrastructure group China Communications Construction's shares were up 0.12% as of 11:59 p.m. ET on May 24 and have fallen 6.8% since April 30.