A123 Systems Inc. (AONEQ), the bankrupt maker of electric-car batteries that received a $249.1 million federal grant, won permission to sell its assets at a Dec. 6 auction where bidders will include Johnson Controls Inc. (JCI) and Wanxiang Group Co.
U.S. Bankruptcy Judge Kevin Carey approved bidding procedures at a hearing today in Wilmington, Delaware, overruling the U.S. Trustee’s objection to a $2.5 million breakup fee Johnson Controls will get if it isn’t the winner. Johnson Controls also would get $3 million for expenses.
The proposed protections for Johnson Controls will “enhance the process,” not chill it, Carey said. He scheduled a Dec. 11 hearing to approve the sale.
About 25 parties interested in A123 assets are under confidentiality agreements, Timothy Pohl, a managing director of Lazard Ltd. (LAZ), told the court. Siemens AG (SIE) of Germany and Tokyo- based NEC Corp. (6701) are among companies interested in bidding for A123 assets, their lawyers said in court today.
The company “continues to engage in active discussions regarding strategic alternatives for its grid, commercial, government and other operations, and has received several indications of interest for these businesses,” A123 said today in a statement.
Bojan Guzina, an attorney representing Wanxiang American Corp., a unit of the Chinese auto-parts maker, told Carey that the company presented a “qualified” bid to A123 last night. Wanxiang is pursuing approval from the Committee on Foreign Investment in the United States.
CFIUS, a multiagency group led by the Treasury Department, reviews mergers and acquisitions for national-security concerns when a takeover may give a foreign owner control of a U.S. company. While filings are voluntary, the committee can begin its own review.
Last week, Wanxiang America said it wanted to be the lead bidder for all of A123’s assets in the court-supervised auction.
Because of the stalking-horse baseline bid, “we have more parties conducting diligence now by a significant margin than we did in the out-of-court process,” Pohl told the court. Some companies are interested in pieces of the business that Johnson Controls isn’t buying, he said.
Carey also approved incentive and retention plans for certain employees. A123 lost three employees since a Nov. 5 hearing, bringing total departures since the case was filed to 25, the company’s lawyers said.
A123 listed assets of $459.8 million and debt of $376 million as of Aug. 31 in its Chapter 11 petition.
The case is In re A123 Systems Inc., 12-12859, U.S. Bankruptcy Court, District of Delaware (Wilmington).
To contact the reporter on this story: Dawn McCarty in Wilmington at email@example.com