A123 Systems reaches agreement to sell substantially all assets to Wanxiang for $256.6M

A123 Systems, Inc. reached agreement on the terms of an asset purchase agreement with Wanxiang America Corporation through which Wanxiang would acquire substantially all of A123’s assets for $256.6 million. (Earlier post.) Wanxiang outbid a joint Johnson Controls and NEC offer and a bid from Siemens in an auction held on 6 December for the assets of the bankrupt Li-ion battery maker.

According to the terms of the asset purchase agreement, Wanxiang would acquire A123’s automotive, grid and commercial business assets, including all technology, products, customer contracts and US facilities in Michigan, Massachusetts and Missouri; its 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 asset purchase agreement with Wanxiang is A123’s Ann Arbor, Mich.-based government business, including all US military contracts, which would be acquired for $2.25 million by Navitas Systems, a Woodridge, Ill.-based provider of energy-enabled system solutions and energy storage products for commercial, industrial and government agency customers.

The completion of the sale to Wanxiang is subject to certain closing conditions, including approval from the Court as well as from the Committee for Foreign Investment in the United States (CIFIUS). Because the total purchase price for A123’s assets would be less than the total amount owed to creditors, the Company does not anticipate any recoveries for its current shareholders and believes its stock to have no value.

The agreement was reached following an auction conducted under the supervision of the United States Bankruptcy Court for the District of Delaware. A hearing at which A123 and Wanxiang will seek the required Court approval of the sale is scheduled for Tuesday, 11 December 2012.

As we had hoped, the auction process for A123’s assets was robust and competitive. We are pleased with the result of the auction and believe that the selected bids from Wanxiang and Navitas maximize the value of A123’s assets for the benefit of our stakeholders. We expect that the sale will be approved by the Court, at which time we plan to execute the separate asset purchase agreements with Wanxiang and Navitas.

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. We believe this transaction balances those risks with A123’s obligation to act in the best interest of our creditors.

—Dave Vieau, CEO of A123

Based in Chicago, Wanxiang America has been in the automotive and industrial markets in the US since 1994 and currently has more than 3,000 employees in the US. It is a subsidiary of Wanxiang Group, China’s largest automotive components manufacturer and one of China’s largest non-state-owned companies. A123 is Wanxiang’s fifth clean energy investment in the US in 2012.

We believe that A123’s industry-leading technology for vehicle electrification, grid energy storage and other industries complements Wanxiang’s strong R&D and manufacturing capabilities, so we think adding A123 to our portfolio of businesses strongly aligns with our strategy of investing in the automotive and cleantech industries in the US.

We plan to build on the engineering and manufacturing capabilities that A123 has established in the US and we are committed to making the long-term investments necessary for A123 to be successful.

—Pin Ni, president of Wanxiang America