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Aecon Group agrees to be acquired by CCCI for $20.37 per share

Aecon Group Inc. and CCCC International Holding Limited (CCCI) has announced that they have entered into a definitive agreement under which CCCI will acquire all of the issued and outstanding common shares of Aecon for $20.37 per share in cash, representing an enterprise value of $1.51 billion.

The purchase price represents a 42% premium to Aecon’s unaffected share price on August 24, 2017and a 9.2x EV/LTM EBITDA multiple. The board of directors of Aecon has unanimously recommended this transaction.

“We believe this is a very positive outcome for Aecon and our key stakeholders,” said The Hon. Brian V. Tobin, P.C., O.C., Aecon’s Chairman. “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.”

“This is an excellent fit for both of our companies,” said Mr Lu Jianzhong, President of CCCI. “Aecon has a strong management team and a very impressive track record that has made it a leading construction company in Canada and a pioneer in public-private partnerships and concession operations. It will now gain access to significant capital, complementary infrastructure expertise and an international network to support its growth ambitions.”

Mr Lu said: “The vision and leadership of John M. Beck, President and CEO, have built Aecon into the successful company it is today, a diversified business focused on innovation and customer service with a formidable management team. We will continue to rely on John’s experience and leadership as we together take Aecon to a new level.”

“This transaction creates significant and immediate value for Aecon shareholders, strengthens our competitive position in Canada and abroad with enhanced capabilities and financial resources, and provides expanded opportunities for our people,” said Mr Beck. “We look forward to partnering with a global leader while retaining Aecon’s Canadian headquarters and values. I am excited and proud to be part of this new chapter for Aecon and Canada.  Moreover, I am personally committed to working with the Aecon management team and CCCI on CEO succession planning which began last year, before our exploring the sale of the company.”

CCCI recognises Aecon as a leading provider of construction services spanning the four core segments of Infrastructure, Energy, Mining, and Concessions with competitive know-how, state of the art facilities, experienced personnel and leading market positions. CCCI recognises Aecon’s importance to Canada and is committed to ensuring that the transaction will deliver benefits to Canada.

CCCI’s size and financial strength will augment Aecon’s access to capital and its ability to bid for larger and more complex projects in Canada, enhancing domestic competition for construction services, and will enable it to compete for more international projects. CCCI will seek out areas in which Aecon could deploy its unique expertise across CCCI’s international network

Aecon will continue to be headquartered in Canada

Retention of Aecon’s Canada-based employees, offering opportunities for Canadians to benefit from expected future growth. Also, there will be continuity of Canadian management and ongoing adherence to Canadian standards of corporate governance. Aecon’s Corporate Social Responsibility and Sustainability Policy will continue, as will its support for Canadian suppliers and community organisations and its commitment to operate in a safe and responsible manner

CCCI is the overseas investment and financing arm and a wholly-owned subsidiary of China Communications Construction Company Limited (CCCC), one of the world’s largest engineering and construction groups. Its core business activities include infrastructure construction, infrastructure design and dredging. It is primarily engaged in providing customers with integrated solutions services for each stage of infrastructure assets, including ports, terminals, roads, bridges, rail and tunnels, leveraging on its extensive operating experience, expertise and know-how accumulated from projects undertaken in a wide range of areas over the past six decades. CCCC has more than 118,000 employees (including 48,000 foreign employees) in more than 140 countries and regions. CCCC currently ranks third in Engineering News Records’ list of the world’s top 225 International Contractors in 2016 and had revenue of US$62 billion and EBITDA of US$5 billion in 2016. CCCC is publicly traded on the Hong Kong (1800.HK) and Shanghai (601800.SH) Stock Exchanges.

CCCI has seen considerable growth in recent years, including through its successful 2015 acquisition of John Holland, one of Australia’s largest engineering and construction companies. Since the acquisition, John Holland has continued to operate under the same name with an Australian management team, has experienced significant business growth in Australia and expanded overseas. In 2010, CCCI acquired Friede & Goldman, a world leader and innovator in offshore architecture and engineering based in Houston, Texas. After its acquisition by CCCI, Friede & Goldman has seen its revenues increase five-fold.

The transaction is the culmination of the sale process conducted by Aecon and disclosed on August 25, 2017. The Aecon board of directors, after consulting with its financial and legal advisors, has unanimously determined that the transaction is in the best interest of Aecon and that the consideration being offered to Aecon shareholders is fair from a financial point of view. The Aecon board has resolved to unanimously recommend that Aecon shareholders vote their shares in favour of the arrangement resolution at the Special Meeting of shareholders to be held on or before December 21, 2017. In connection with the proposed transaction, each director and senior officer of Aecon has agreed to support and vote their shares in favour of the arrangement resolution.

BMO Capital Markets and TD Securities are acting as joint financial advisors to Aecon and have each provided an opinion to the board of directors of Aecon that, subject to the assumptions, limitations and qualifications contained therein, the consideration to be received by Aecon shareholders pursuant to the transaction is fair to Aecon shareholders from a financial point of view. A copy of each opinion will be included in the management proxy circular to be filed and mailed to Aecon shareholders in connection with the approval of the transaction at a Special Meeting of shareholders.

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.