Plans by the giant China State Construction Engineering Corporation (CSCEC) to buy an 88% stake in the Australian contractor Probuild have been dropped after the Australian government said it would reject the deal on grounds of national security.
CSCEC, ranked the biggest construction company in the world by revenue, had been in talks to acquire Probuild with Probuild’s South African parent Wilson Bayly Holmes-Ovcon (WBHO) since June 2020. The price of the stake was A$300m (US$232m), ABC reported.
WBHO told the Johannesburg Stock Exchange on Monday, 11 January that CSCEC withdrew its offer after parties were advised that its application to the Australian Foreign Investment Review Board (FIRB) would be rejected on national security grounds.
In its statement, WBHO said it "remains optimistic about the fundamentals of Probuild and its prospects in the Australian market".
Chinese foreign ministry spokesman Lijian Zhao criticised the Probuild decision, saying on Twitter yesterday that it was "Another example of how the Australian government politicizes trade & investment & discriminates Chinese companies, hurting the country’s own credibility & reputation."
The decision against CSCEC reflects sharply increasing tensions between China and Australia across trade, diplomatic and defence fronts as Australia’s Coalition government, in parallel with the administration of US President Donald Trump, has opposed China’s growing dominance in technology and its assertion of territorial claims in the South China Sea.
In August 2018, Australia became the first country to ban Huawei from supplying its 5G wireless technology, a move that led to a spate of retaliatory restrictions by China on Australian imports of beef, iron, coal, wine, grain and other commodities. China is Australia’s biggest trading partner.
The Probuild case marks a low point in relations compared to 2015, when another huge builder, China Communications Construction Company (CCCC) bought one of Australia’s leading infrastructure firms, John Holland, for approximately US$950m (A$1.15bn).
Simon Gray, Probuild’s executive chairman, told the Australian Financial Review that Probuild undertook less sensitive work than John Holland.
"It’s more politics than anything else… No one can give us a real reason why we’re a national security risk. It’s a joke," he said.
Tough new restrictions on foreign investment in Australia came into effect on 1 January.Â
In August 2020, both CCCC and China State Construction Group, of which CSCEC is the Shanghai-listed subsidiary, were added to the US Department of Defense’s list of "Communist Chinese military companies", which the Trump administration viewed as supporting China’s military-industrial complex and threatening the US.
On 12 November, President Trump signed an executive order prohibiting US investors from buying shares in these companies, insisting that doing so effectively finances China’s military capability.
In December 2020, Probuild was named National Construction Master Builder of the Year, and its projects, The Towers and Ritz Carlton at Perth’s Elizabeth Quay (pictured) won National High-Rise Apartment Building of the year at the Master Builders National Excellence in Building and Construction Awards.
Separately, in 2018, the Canadian government blocked the CAN$1.5bn sale of Canadian construction firm Aecon to CCCC citing concerns over national security.
Image: Probuild won won National High-Rise Apartment Building of the Year with its The Towers and Ritz Carlton at Perth’s Elizabeth Quay (Probuild)
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I find the excuse of national security odd! Perhaps more compelling is that the take over of a Chinese company by an Australian company would be a non-starter.