Aecon Group. Inc. has extended the timeline of its proposed takeover by a Chinese buyer, saying Prime Minister Justin Trudeau’s cabinet is reviewing the deal on national security grounds.
In a statement yesterday, Aecon pushed the “outside date” to complete its plan of arrangement with a unit of China Communications Construction Co. to March 30, from Feb. 23, after the government “ordered a continuation of the national security review of the proposed acquisition.” It still expects the deal to close by the end of the second quarter, “assuming the satisfaction or waiver” of remaining conditions.
Investors had been betting a takeover of Aecon Group Inc. is no sure thing, with shares posting their biggest one-week decline since the CAD1.19 billion (USD945 million) offer from a Chinese buyer amid questions of whether the Canadian government will review it on grounds of national security.
Canada’s analysis into whether the transaction is in the country’s “net benefit” had already stretched into overtime. Yesterday, Aecon said Trudeau’s government had given notice under section 25.3 of the Investment Canada Act, a passage that allows the government to order a review if it considers the takeover could be “injurious to national security.”
The deal, announced in October, would see Aecon acquired by the Chinese firm for CAD20.37 a share. The stock ended Friday at CAD19.50, and traded as low as CAD19.33 on the day, a gap of 5.1 percent from the takeover price. The shares fell 2.3 percent last week, the biggest one-week drop since the deal was announced Oct. 26.
The purchaser filed an application for review on Nov. 9. Once that application is “certified complete,” it begins a 45-day clock for Innovation Minister Navdeep Bains’ office to review the deal, according to a summary of the process provided to shareholders by the company. The government can request an extra 30-day extension for its so-called net benefit reviews of major deals, such as this one, Aecon said. Critically, the deadline can also be extended if the proponent and government agree.
Aecon continues “to respond to officials from the Investment Review Division” in Bains’s office, Chief Executive Officer John Beck said last week in another statement. “Aecon welcomes the review on the merits of the proposed transaction and will continue to seek to obtain all the necessary regulatory approvals to close the transaction.” Bloomberg