Cabinet steps up security review of proposed Chinese takeover of Aecon Group

Toronto-based Aecon said the minister responsible for economic development informed the company that cabinet has ordered a further investigation of the deal under the Investment Canada Act, that will take more time.

A spokesman for Economic Development Minister Navdeep Bains said cabinet issued the order, which is the next step in the “rigorous” review process.

“Based on the advice we have received from national security agencies we believe that there is a potential injury to national security,” said Karl Sasseville, spokesman for Bains.

He declined to specify what prompted security agencies to make this recommendation.

Chris Murray of AltaCorp Capital Inc. said he believes the government’s primary concern may be Aecon’s telecom infrastructure group, which builds significant core communications networks for several major Canadian carriers.

“While we remain positive about the closure of the transaction, we are cognizant that at this juncture, this is now a political process, which adds layers of complexity and uncertainty,” he wrote in a report.

Murray added that he believes the transaction may be a “bargaining chip in Canada-China” trade discussions.

A spokesman for International Trade Minister Francois-Philippe Champagne said the two processes are unrelated.

The government’s approval is the last major hurdle that Aecon must clear to close the $1.5 billion deal.

The deal has already received approval from the Competition Bureau, Aecon shareholders and the Chinese government.

The takeover of Aecon by CCCC International Holding Ltd. (CCCI) has come under intense criticism from a number of sources, including Conservative member of Parliament Tony Clement, a former industry minister.

Sasseville said the security review extension is not the result of the intense public scrutiny.

“This is a rigorous and thorough process,” he said in an interview. “It has nothing to do with the coverage in the press, nothing to do with the Conservative Party of Canada interventions in the House.”

Aecon fired back at its critics last week, saying on Friday that it feared the federal security review would be tainted by false or misleading claims.

On Monday, Aecon said CCCI has agreed to extend the deadline for closing the deal to March 30 — five weeks later than the previous deadline of Feb. 23.

The transaction is expected to close before July 13.

— Ross Marowits