Aecon is the lead in a consortium that was awarded the contract to build the spillway and generating station for Site C dam.

Chinese investors won’t be profiting from the $10.7 billion Site C dam project, following the rejection by the federal government of a take-over bid of one of the contractors involved by China’s CCCC International Holding Ltd.

The Canadian government has rejected the $1.5 billion takeover of Canada’s Aecon Group Inc. (TSX:ARE), citing national security concerns.

“As is always the case, we listened to the advice of our national security agencies throughout the multi-step national security review process under the Investment Canada Act," Navdeep Bains, federal minister of Innovation, Science and Economic Development, said in a press release.“Based on their findings, in order to protect national security, we ordered CCCI not to implement the proposed investment."

The news broke Wednesday, May 23, after the close of markets. At the open of markets this morning, Aecon's shares dropped 15% – erasing roughly $163 million in value, as shares dropped from $17.34 per share to $14.62.

Aecon is the lead contractor in a consortium that was awarded a $1.6 billion contract in December 2017 to build the spillway and generating station for the Site C dam. Work on that project starts this summer and will take fiver years, according to BC Hydro.

Aecon owns a 30% share in a consortium that also includes Dragados Canada, Inc. (27.5%), Flatiron Constructors Canada Ltd. (27.5%), and EBC Inc. (15%).

Aecon's CEO, John Beck, said the company was disappointed with the decision.

“Through our proposed transaction with CCCI we had outlined a vision in which Aecon would be better able to compete with the many large global construction companies actively working in Canada,” he said in a press release.

“The deal offered considerable benefits to Aecon and its various stakeholders. While we have been prevented from pursuing the transaction, we are moving forward from a position of strength.

“Over the past several months Aecon has secured numerous large-scale projects, has a record backlog, and a significant pipeline of opportunities ahead of it.”

CCCC is the overseas financing arm of China Communications Construction Co. Ltd., a state-owned, publicly traded construction company headquartered in Beijing. Concerns had been raised over a Chinese state-owned company being involved in building critical Canadian infrastructure, from dams and rail systems to nuclear power plants.

Some Canadian suppliers may be relieved with Ottawa's decision. One Canadian supplier, who did not want to be quoted, told Business in Vancouver that there were concerns that goods currently supplied to Aecon by Canadian suppliers – from tools to work wear – would in the future be supplied by Chinese companies.

Aecon’s shareholders had approved the takeover bid, which would have seen CCCC International acquire all of Aecon’s shares at $20.37 per share.

The acquisition was required to pass a review under the Investment Canada Act, and the federal government also required it to be subject to a national security review.

nbennett@biv.com