$1.5B deal
Chinese company inks deal to buy builder of Waterloo Region’s LRT
TORONTO — The head of Calgary-based Aecon Group says its deal to be acquired for $1.5 billion by CCCC International Holding Ltd. of China will create more job opportunities in Canada and allow the construction firm to operate on a level playing field against global competition.
“We have a long history of international projects that we’ve done, but we’ve always done one or two at a time — never more,” Aecon CEO John Beck said in an interview Thursday.
“We have expertise that is recognized around the world that we’ll now be able to deploy more effectively, which means more jobs and more opportunities for Aecon based here Canada.”
In its 140-year history, Aecon has been involved in landmark construction and engineering projects, including the CN Tower, Vancouver’s SkyTrain and the Halifax Shipyard. It currently has major contracts for Toronto transit and nuclear refurbishment, among others.
Aecon is a member of the GrandLinq consortium that is building and running Waterloo Region’s light rail transit project. It is responsible for the design, construction, operation and maintenance of the 19-kilometre rail line.
Aecon also has a large presence in Cambridge, through its nuclear division, which has facilities on Sheldon Drive.
The company is involved in the refurbishment of the Darlington Nuclear Generating Station in a 50/50 joint venture with SNC-Lavalin Nuclear. Aecon also produces equipment for, and holds long-term maintenance contracts with, a number of nuclear clients.
In August, the nuclear division was reported to employ about 450 people in Cambridge.
Beck says Aecon has $25 billion- to $35-billion worth of business in the pipeline right now that it’s bidding on. “So we want to be ready and we want to have the financial muscle to be able to compete with the international firms,” he said.
CCCC International has agreed to pay $20.37 per Aecon share in cash to buy the company, which said in August that it was looking for potential buyers.
“We believe this is a very positive outcome for Aecon and our key stakeholders,” Aecon chair Brian Tobin said.
“This transaction is the result of an active and diligent sale process that has enabled us to select an outstanding partner and create significant shareholder value.”
Aecon shares gained $3.21, or 19.43 per cent, on Thursday, closing at $19.73 on the Toronto Stock Exchange.
The announcement of the deal comes at a challenging time for Aecon, which has seen its value take a major hit from the drop off in energy and mining projects due to a commodities downturn in recent years.
The construction company reported a thirdquarter profit of $24.6 million or 37 cents per diluted share, down from a profit of $27.4 million or 42 cents per diluted share a year ago. Revenue fell to $759.7 million compared with $838.1 million in the same quarter last year.
RBC Dominion Securities analyst Derek Spronck said in a note to clients that he sees
Aecon’s acquisition price as “attractive, given the challenging operating results.”
“While we thought a sale could be challenging, we did see a foreign buyer as the more likely option.”
CCCC International, also known as CCCI, is the overseas investment and financing arm of China Communications Construction Company Ltd., one of the world’s largest engineering and construction groups. Aecon will continue to be headquartered in Canada while CCCI’s financial strength will help it bid for larger projects.
“Aecon has a strong management team and a very impressive track record that have made it a leading construction company in Canada and a pioneer in public private partnerships and concession operations,” CCCI president Lu Jianzhong said.
“It will now gain access to significant capital, complementary infrastructure expertise and an international network to support its growth ambitions.”
The offer requires the approval of two-thirds of the votes cast at a special meeting of Aecon shareholders as well as government and regulatory approvals under the Investment Canada Act, the Canadian Competition Act and authorities in China.
In terms of regulatory approvals, Spronck said Aecon’s only potential obstacle could be its significant nuclear work in Canada.
“We do not believe there would be any issues with a foreign buyer acquiring these assets, and if there are, we believe (Aecon) would be able to sell off the nuclear segment easily,” he said.