Skepticism grows over takeover of Aecon
Investor skepticism appears TORONTO to be growing that Aecon Group Inc.’s takeover by a Chinese company will be approved by the Canadian government, at least in its present form.
Shares of the Toronto-based construction company have dropped to their lowest level relative to China Communications Construction Co.’s offer price of $20.37 since the deal was announced in October. The gap between the share price and the offer stood at $1.81 at the close on Wednesday.
The Canadian government launched a full national security review of the takeover bid last month under a section of the Investment Canada Act that allows it to block deals that could be “injurious to national security.” It hasn’t given any updates since then.
Critics of the deal have pointed to the potential involvement of the Communist party in decisionmaking and alleged corruption at the state-owned company, but Aecon has pushed back against what it says are misleading statements about the deal.
The transaction could see additional delays, be blocked altogether or have conditions set that would require divestiture of some of Aecon’s assets, according to Chris Murray, an analyst at AltaCorp Capital Inc. If a divestiture is required, it would most likely be Aecon’s telecom business, he said.
“We believe there is a very low probability of the transaction being approved as is, given security concerns expressed by the federal government and other allies around telecom infrastructure,” Murray wrote in a note published Tuesday.