MONTREAL — Aecon Group Inc. shares plummeted more than 15 per cent Thursday morning to a nine-month low in the first trading after the federal government blocked the proposed $1.5-billion takeover by a Chinese state-owned company for reasons of national security.
The shares traded at $14.70 on the Toronto Stock Exchange just after the market opened, a drop of $2.64 or 15.2 per cent.
It was the lowest level since late August, when the company announced it was launching a strategic review that included a potential sale.
The company announced in October that it had signed a deal to be acquired by CCCC International Holding Ltd., but the agreement has been controversial ever since.
Ottawa announced a full national security review of the Aecon deal in February as experts urged the government to proceed cautiously when weighing any investment bids by Chinese state firms and to be as transparent as possible in reviewing the proposed deal.
Economic Development Minister Navdeep Bains confirmed the government’s decision to block the deal after markets closed Wednesday.
Analyst Frederic Bastien of Raymond James says the market was already pricing in a certain degree of deal uncertainty before the announcement, with the company’s share price on Wednesday closing 15 per cent below CCCC International Holding Ltd.’s offer price of $20.37 per share.
More importantly, he said it closed only five per cent above $16.60, the average share price during the four quarters that preceded any word of a sale process.
Bastien says the price could fall even lower as the stock moves from hedge and arbitrage funds back into the hands of fundamental investors.
He adds the Toronto-based company is stronger than it was a year ago thanks to large infrastructure contracts including the REM light rail project in Montreal and the Finch West light rail project in Toronto, which contributed to a record high backlog.
Aecon has a long history of participation in Canadian construction and engineering projects such as the CN Tower, Vancouver’s SkyTrain, the St. Lawrence Seaway and the Halifax shipyard.
Aecon said it was disappointed with the government’s decision and will continue to be a leading player in the Canadian construction and infrastructure market.
John Beck will remain president and CEO until a permanent replacement is found, while the sales process it had initiated will end.