NEW YORK (AP) - Bankrupt battery maker A123 Systems Inc. on Sunday
said it will sell most of its assets to the U.S. arm of Chinese auto
parts conglomerate Wanxiang Group Corp. for $256.6 million.
Wanxiang America Corp. won an auction conducted under the supervision of the U.S. Bankruptcy Court for the District of Delaware.
A123's government business will be sold separately, for $2.25 million, to Navitas Systems, of Woodridge, Ill.
A hearing seeking the necessary court approval of
the sale is scheduled for Tuesday. The deal must also be okayed by the
Committee for Foreign Investment in the United States, a federal
inter-agency committee that reviews sales of U.S. companies to foreign
owners. The company has about 2,000 employees.
Waltham, Mass.-based A123, which makes lithium ion
batteries for electric cars, grid storage and commercial and military
applications, was awarded a $249 million grant from the Department of
Energy in August 2009 to help it build U.S. factories. About $130
million of that grant was delivered before the company fell victim to
the lackluster market for electric cars.
In September 2009, it also held a successful
initial public offering, raising $380 million as its stock gained more
than 50 percent, to close over $20. Shares closed at 13 cents the
session before it filed for bankruptcy protection.
Despite opening several plants, developing
highly-touted new technology, including a battery that could operate in
extreme heat or cold, and signing deals with top automakers like General
Motors, Chrysler and India's Tata Motors, the company never posted a
profit. In August, it reported an $83 million loss for the second
quarter. At the same time, A123 said it reached a financing deal with
Wanxiang Group for up to $450 million to help it stay afloat.
But still short of cash, the company sought
bankruptcy protection in October, and said it would sell its automotive
unit to Milwaukee-based auto parts marker Johnson Controls Inc. for $125
million.
Wanxiang challenged Johnson Controls' role as the
primary bidder, and stepped in to provide bankruptcy financing to when
the U.S. company declined to do so. In a statement Sunday, Johnson
Controls said it officially withdrew from the auction when it declined
to match Wanxiang's bid, because the price was higher than the value of
the assets to its operations.
The Justice Department has said A123 needs the
government's consent to sell its assets, maintaining in Bankruptcy Court
that any sale must protect the government's interests because of the
2009 grant.
DOJ maintained that its assets included the roughly
$120 million that wasn't handed over yet under the grant, A123's
cost-sharing obligations under federal assistance programs, and property
and equipment purchased with government funds.
A123 said Sunday that the terms of the deal will
see Wanxiang acquire its automotive, grid and commercial business
assets, including all technology, products, customer contracts and U.S.
facilities in Michigan, Massachusetts and Missouri. It will also get
A123's cathode powder manufacturing operations in China and its equity
interest in Shanghai Advanced Traction Battery Systems Co., A123's joint
venture with Shanghai Automotive.
Excluded from the agreement is A123's Ann Arbor,
Mich.-based government business, including all U.S. military contracts,
which would be acquired for $2.25 million by Navitas Systems, a company
that makes energy storage products for commercial, industrial and
government agencies.
""We think we have structured this transaction to
address potential national security concerns expressed during the review
of our previous investment agreement with Wanxiang announced in August,
as well as to address concerns raised by the Department of Energy,"
said A123 CEO Dave Vieau in a statement. "We believe this transaction
balances those risks with A123's obligation to act in the best interest
of our creditors."
If the deals are approved by the court, the shares
will be worthless. That's because proceeds from the sale of the two
parts of A123 would be less than the company owes its creditors.
Based in Chicago, Wanxiang America has been in the
automotive and industrial markets in the U.S. since 1994 and currently
has more than 3,000 U.S. employees. It is a subsidiary of Wanxiang
Group, China's largest automotive components manufacturer and one of
China's largest non-state-owned companies.
"We plan to build on the engineering and
manufacturing capabilities that A123 has established in the U.S. and we
are committed to making the long-term investments necessary for A123 to
be successful," said Pin Ni, president of Wanxiang America.
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