by William G. Reinhardt, PWF editor
If its all-cash purchase of Canada’s Aecon Group Inc. is approved in the next few months, China’s civil works giant China Communications Construction Inc. (CCCI) will have bought a seat next to ACS Group, Flatiron, and other major players who are leaders in the Canadian and U.S. P3 market.
At the same time, ACS and Italian toll road operator Atlantia are close to completing their acquisition of Abertis, creating a major new global platform for infrastructure investments.
CCCI is majority owned by the government of China. As a holding company, it ranks third on ENR’s list of the world’s Top 225 International Contractors. It is publicly traded and had revenue of US$62 billion and EBITDA of $5 billion in 2016.
CCCI’s Cdn$1.5 billion (US$1.17 billion) offer for Aecon has cleared competition review, but still must get national security approvals under the Investment Canada Act. The deadline for completing that review was recently extended from March 30 to July 13, 2018.
As proposed by CCCI, Aecon will continue to operate under its brand name and be headquartered in Canada with no change in management, employees, or corporate governance.
As of June 30, 2017, Aecon had after-tax profits of Cdn$47 million (US$36.7 million) on revenues of Cdn$3.2 billion (US$2.5 billion), and a backlog of Cdn$ 4.35 billion (US$3.4 billion).
Barclays is acting as financial advisor to CCCI. Davies Ward Phillips & Vineberg LLP is acting as legal counsel to Aecon and Blake, Cassels & Graydon LLP is acting as legal counsel to CCCI.
(Aecon’s suitor, CCCI, is sometimes confused with China Construction America (CCA), which is based in Jersey City, NJ. CCA teamed with Granite on an unsuccessful P3 pursuit a few years ago. It has had considerable success as a general contractor in a wide range of markets. It is embroiled in a lawsuit brought by a Bahamian developer over a failed hotel project there.)
. . . Canada Is The Door To The U.S. P3 Market
Buying Aecon would quickly open the door for CCCI to learn the ways of the P3 market in North America.
Alone or teamed with other builders, Aecon has developed seven P3 projects in Canada, two in Israel, and one in Ecuador.
Aecon is currently teamed with ACS as both an equity investor and jv contractor for a $7.8-billion DBFM rail project they won in 2015 to build the Eglinton Crosstown line in Toronto. Metro Toronto has announced a major investment in transit, and Ontario’s 2017 budget includes $156 billion for infrastructure, a third of that for transit and $26 billion for highways.
Aecon also is shortlisted with ACS for a $1-billion light-rail project in Hamilton, Ontario, and for the $2-billion Gordie Howe Bridge DBFOM project in Windsor, Ontario. On March 26, ACS’s Dragados, Flatiron and Aecon were awarded a $1.3-billion civil works contract by BC Hydro for its Site C project in British Columbia.
Many of the most successful P3 developers in the U.S. entered the American market through Canada.
• Cintra signed a 99-year lease for Toronto’s highly lucrative Highway 407 toll road in 1999. It has won three more competitions in Ontario since then, and five in the U.S.
• ACS’s Iridium subsidiary was selected to build a toll road in New Brunswick in 1998. ACS has gone on to win 10 more pursuits in Canada, and five in the U.S.
• Plenary of Australia won its first Canadian social infrastructure P3 in 2007. It has added 22 more since then, including five transportation projects. It now has five P3 projects underway in the U.S.
William G. Reinhardt, Editor
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