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China’s Wanxiang Wins A123 Auction for $260 Million

Wanxiang Group Outbids Johnson Controls for Most of A123 Assets
Workers operate on the vehicle battery assembly area of Wanxiang Group's electric automobile division in Hangzhou, Zhejiang province, China. Photographer: Qilai Shen/Bloomberg

Wanxiang Group Co., China’s biggest auto-parts maker, agreed to buy most of electric car battery maker A123 Systems Inc. for $256.6 million, outbidding Johnson Controls Inc. in a U.S. bankruptcy auction.

The agreement is for assets including A123’s automotive, grid and commercial business, though it excludes the Waltham, Massachusetts-based company’s military contracts, A123 said in a statement yesterday. The accord is subject to Court approval on Dec. 11, it said. Johnson Controls said it declined to match Wanxiang’s offer, though the deal is still subject to review from the Committee on Foreign Investment in the U.S.

Wanxiang is seeking A123’s battery technology, used in Fisker Automotive Inc.’s Karma sedan, as China pushes its companies to develop electric vehicles. An earlier accord with the Chinese company was scrapped in October, when A123 said it filed for bankruptcy protection and agreed to sell its automotive assets to Johnson Controls.

“The purchase of A123 would automatically vault Wanxiang to become probably the number one battery maker in China,” said Shu Sun, a Beijing-based analyst at Bloomberg New Energy Finance. “Technology-wise, no battery company in China is likely to match A123’s products in performance and reliability.”

Military Contracts

A123 supplies electric-car batteries to a dozen customers, according Bloomberg New Energy Finance estimates. That’s the highest number of clients in the industry, though LG Chem Ltd. and NEC Corp.’s venture with Leaf-maker Nissan Motor Co. have higher volume sales, Sun said.

Wanxiang Qianchao Co., a listed unit of the closely held parent advanced 1.4 percent to 4.25 yuan in Shenzhen trading today, narrowing its loss for the year to 25 percent.

The auction results also pave the way for Hangzhou, China-based Wanxiang to receive A123’s cathode powder plant in China and its share of a joint venture with Shanghai Automotive Industry Corp. called Shanghai Advanced Traction Battery Systems Co., according to yesterday’s statement.

Navitas Systems, a Woodridge, Illinois-based company, will buy A123’s Ann Arbor, Michigan-based government business for $2.25 million, according to the statement.

A123, the recipient of a $249.1 million federal grant, held the auction behind closed doors in the Chicago law offices of Latham & Watkins. The auction began on Dec. 6 with prospective bidders including Johnson Controls, Wanxiang, Siemens AG of Germany and Tokyo-based NEC Corp.

Court Hearing

The company will seek court approval to sell the assets from U.S. Bankruptcy judge Kevin Carey at a Dec. 11 hearing in Wilmington, Delaware.

Wanxiang, whose businesses range from auto parts to fishery and beverages, has been pursuing approval from CFIUS, a multiagency group led by the Treasury Department that reviews mergers and acquisitions for national-security concerns when a takeover may give a foreign owner control of a U.S. company.

The sale of A123’s assets is subject to CFIUS review and approval from the U.S. government, Johnson Controls said in a statement yesterday.

In its previous agreement announced in August, the Chinese auto-parts maker agreed to offer as much as $465 million in financing in exchange for securities convertible into a stake of as much as 80 percent of A123.

Fisker, A123’s main customer, had been awaiting for the sale of the company’s Michigan plant so it could resume production of the $103,000 plug-in Karma sedan.

Bankruptcy Filing

A123 filed for bankruptcy in October after the Wanxiang deal was scuttled amid congressional Republicans’ reluctance to allow the sale of the government-funded company to a Chinese company.

A123’s automotive business includes facilities in Livonia and Romulus, Michigan. A123 used $132 million of the grant toward building the two Michigan factories.

The grid business focuses on energy generation, transmission and distribution while the commercial division develops products for industries such as telecommunications, industrial robotics and power tools, according to court papers. A123 works with the government on portable power solutions, unmanned aerial vehicles, pulsed power weapons as well as small energy cells for remote devices.

A123 listed assets of $459.8 million and debt of $376 million as of Aug. 31 in court documents.

The case is In re A123 Systems Inc., 12-12859, U.S. Bankruptcy Court, District of Delaware (Wilmington).

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