The head of Calgary-based Aecon Group Inc. 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,” said Aecon CEO John Beck 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.
Beck says the company 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 chairman 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 (TSX:ARE) were up $2.94, or 17.80 per cent, at $19.46 on the Toronto Stock Exchange in afternoon trading.
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 third-quarter 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,” he said.
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 size and financial strength will help it bid for larger and more complex projects, the companies said.
“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.
Beck says he does not see any issue with the company’s nuclear work affecting regulatory approvals. “The Canadian management team, the Canadian workers will be the same, the company is being run entirely by Canadians. No change,” he said.
“But there is a process we have to go through and we will go through it. We’ll follow all the rules. We’re expecting approvals every step of the way,” he said.