File photo by THE CANADIAN PRESS Aecon Construction scissor lift operator, Abel Sousa, looks at Toronto Pearson International Airport’s new Terminal 1 check-in area from above the scissor lift.

Cabinet orders deeper security review of proposed Chinese takeover of Aecon Group

MONTREAL — Canadian security agencies are voicing their concern about the proposed takeover of Aecon Group Inc. by a Chinese state-owned business, prompting Ottawa to order a full national security review of the deal.

“Based upon the advice we have received from national security agencies we believe that there is a potential of injury to national security,” Karl Sasseville, a spokesman for Economic Development Minister Navdeep Bains, said in an interview.

He said the cabinet order is the next step in the “rigorous” review process but declined to specify what prompted security agencies to make this recommendation.

Toronto-based Aecon said Bains informed the company that cabinet has ordered a further investigation of the deal under the Investment Canada Act, which will take more time.

Concerns have been raised about the murky holdings of Chinese state-owned CCCC International Holding Ltd. (CCCI), the potential involvement of the Communist Party in decision-making and alleged corruption.

CCCI’s proposed takeover of the Canadian construction company has come under intense domestic criticism from its rivals in the construction industry and Conservative member of Parliament Tony Clement, a former industry minister.

“About time!” Clement tweeted about the full national security review.

Governments in Europe and the United States have also warned against approving the $1.5-billion deal.

The decision may give the government some wiggle room in this politically difficult issue, said Mark Warner, an international trade and investment lawyer.

“It certainly gives them an excuse to get out of it if they want to,” he said from Toronto.

“But I think it’s probably too early to say that this is an indication that it won’t be approved.”

Yuri Lynk of Canaccord Genuity said the cabinet order is not a surprise and he doubts it will result in the deal not closing.

He said the review is similar to what took place in Australia with a Chinese acquisition that added two months to the process.

“Why wouldn’t the government cover their behind and do that,” Lynk said of Canada’s deeper security review.

Warner said the deeper security review is important to ensure public confidence and keep faith with those foreign governments.

“It is very hard for me to see how Canada could stand outside of that,” he said from Toronto. “If the public position isn’t enough I would have thought that privately Canada has heard something from our trading partners.”

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