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Johnson Controls Appeals A123 Bankruptcy Sale to Wanxiang

Johnson Controls Inc., the lead bidder at the auction for assets of bankrupt A123 Systems Inc., said it is appealing the court decision that gave Wanxiang Group Co. approval to buy most of the assets.

U.S. Bankruptcy Judge Kevin Carey approved the sale at a Dec. 11 hearing in Wilmington, Delaware, saying “the auction was robust, the price is adequate.” Wanxiang beat a joint bid from Milwaukee-based Johnson Controls and Tokyo-based NEC Corp.

The sale was questioned by some Republican lawmakers because the battery maker would go to an overseas company.

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

Johnson Controls, the lead bidder for the auction with a $125 million offer for the auto business, drew criticism from the unsecured creditors’ committee, which claimed the jilted bidder was attempting to undermine the sale.

The creditors asked Carey to set aside a $5.5 million payment that Johnson Controls was set to receive for being outbid at the auction and its auction-related expenses.

“We appreciated the opportunity to serve as stalking horse, which resulted in significant value to the estate, creditors and employees,” Alex Molinaroli, president of Johnson Controls Power Solutions, said today in a statement.

Breakup Fee

The company said it is appealing the order to obtain the breakup fee and expense reimbursement previously approved by the court.

Wanxiang, China’s biggest auto-parts maker, will acquire substantially all of A123’s assets including its automotive, energy-grid and commercial businesses for about $256.6 million. A123 received approval to sell its government business to Woodridge, Illinois-based Navitas Systems LLC for about $2.25 million.

The Wanxiang deal is still subject to review by the Committee on Foreign Investment in the U.S. CFIUS, as it is known, is a federal interagency 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.

A123, based in Waltham, Massachusetts, 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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