The takeover of a major construction contractor which is owned by a South African firm but based in Australia will not proceed after the sale was reportedly blocked on national security grounds.

In a statement released to the Johannesburg Stock Exchange, South African construction contractor Wilson Bayly Homes Ovcon (WBHO) said a proposed sale of its 88 percent stake in Australian based construction contracting firm Probuild to China State Engineering Corporation (CSEC) had been withdrawn.

This happened after CESC withdrew an application with the Australian Foreign Investment Review Board after being advised that Treasurer Josh Frydenberg was set to block the proposed deal on the grounds of national security, WBHO said.

“WBHO has been advised by the potential acquirer of Probuild that it has withdrawn its proposed investment application in Probuild lodged with the Australian Foreign Investment Review Board following advice that its application would be rejected by the Federal Government on the grounds of national security,” the statement read.

WHBO noted that important terms of the proposed sale – which was first flagged as an indicative and non-binding offer in June – had been finalised and that due diligence had been completed.

WHBO said it remained optimistic about Probuild’s future and continues to assess possible opportunities to maximise the company’s value and potential.

Frydenberg has neither confirmed nor denied whether he had intended to block the bid.

A report in The Australian noted that construction contractors are becoming a greater focus of the Foreign Investment Review Board due to their potential to pass on sensitive information about building blueprints and supply chains.

In Probuild’s case, that report noted that the company delivered Victoria’s police headquarters and is involved in construction of the new Melbourne base for CSL, which is producing COVID-19 vaccines.

Australian Strategic Policy Institute executive director Peter Jennings welcomed the bid’s rejection, saying that large state-owned companies in China would have links to the Chinese military.