May 24, 2018 / 1:57 AM / a year ago

UPDATE 1-Canada blocks Chinese takeover of Aecon on security grounds

(Adds statement from Canadian innovation minister, Aecon, CCCC response, background)

May 23 (Reuters) - Canada has blocked a proposed C$1.51 billion ($1.18 billion) takeover of construction company Aecon Group Inc by a unit of China Communications Construction Co Ltd on national security grounds, the government said on Wednesday.

The completion date of Aecon’s deal with CCCC International Holding Ltd, the overseas investment and financing arm of China Communications, had been pushed back in February as Canada extended a national security review, underscoring rising wariness of Chinese firms buying up assets in Western countries.

The government ordered CCCC International Holding Ltd not to implement the proposed investment to protect national security, Canadian Innovation Minister Navdeep Bains said in a statement.

“Our government is open to international investment that creates jobs and increases prosperity, but not at the expense of national security,” Bains said.

Canadian Prime Minister Justin Trudeau said earlier his government would closely monitor security issues when it decided whether to allow the deal, examining the implications for intellectual property protections.

Ottawa’s move comes as Canada is in exploratory trade talks with China as the country seeks to diversify its export markets.

Aecon said it was disappointed with the government’s decision and was no longer pursuing a sale process.

An executive from CCCC’s investor relations team in Beijing told Reuters the company had yet to receive relevant documents from the Canadian government.

The Committee on Foreign Investment in the United States (CFIUS), which scrutinizes foreign purchases of U.S. assets to protect national security interests, has been tightening scrutiny of Chinese companies’ acquisitions of American companies under the Trump administration.

Earlier this month, Chinese conglomerate HNA Group dropped its bid for most of SkyBridge Capital.

In January, Ant Financial’s plan to acquire U.S. money transfer company MoneyGram International collapsed after CFIUS rejected it over national security concerns.

$1 = 1.2840 Canadian dollars Reporting by Taenaz Shakir and Rama Venkat Raman in Bengaluru, Leah Schnurr in Ottawa and Brenda Goh in Shanghai; Editing by Anil D'Silva and Peter Cooney

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