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A123 Systems and Wanxiang execute definitive agreements for investment of up to $465M in A123

US-based Li-ion battery manufacturer A123 Systems announced the execution of definitive agreements with China’s Wanxiang Group Corporation, which follows the non-binding memorandum of understanding (MOU) that A123 signed with Wanxiang on 8 August 2012. (Earlier post.) Under the terms of the definitive agreements, Wanxiang plans to invest up to $465 million in A123, which includes an initial credit extension of $25 million that A123 expects to receive this week.

Wanxiang is China’s largest automotive components manufacturer and one of China’s largest non-government-owned companies. (Earlier post.) A123 Systems expects the full investment from Wanxiang will provide it with the capital necessary to strengthen its competitive position in the global vehicle electrification and grid energy storage markets.

We believe that the significant commitment of capital from Wanxiang would help strengthen A123’s financial position, and by leveraging Wanxiang’s global capabilities, we expect to see increased demand for our products. Further, Wanxiang has demonstrated its commitment to partnering with and investing in U.S. companies, so we also believe that we will continue to expand on our strong manufacturing and systems engineering capabilities in Michigan and Massachusetts.

— David Vieau, CEO of A123

Pursuant to the terms of the definitive agreements, Wanxiang would provide A123 with up to $75 million in initial debt financing under a Senior Secured Bridge Facility.

In addition to the initial credit extension of $25 million, $50 million would be funded after the satisfaction of certain closing conditions. Subsequently, upon satisfaction of certain closing conditions, Wanxiang would purchase $200 million aggregate principal amount of A123’s 8.00% Senior Secured Convertible Notes.

The agreements also include the potential for Wanxiang to invest up to an additional $190 million by exercising the warrants that will be issued in connection with the Bridge Facility and the 8.00% Convertible Notes for cash.

Incurrence of the remaining $50 million of loans under the Senior Secured Bridge Facility is subject to the satisfaction of certain approvals and conditions, including receipt of favorable determination from the Committee on Foreign Investment in the United States and receipt of Chinese government approvals.

Issuance of the 8.00% Convertible Notes and the related warrants are also subject to additional conditions, including approval from A123’s shareholders, termination of the Hart-Scott-Rodino waiting period, the conversion or redemption of all the outstanding 6.00% Senior Convertible Notes due 2013 and related warrants and the repurchase or retirement of at least 90% of A123’s outstanding 3.75% Convertible Subordinated Notes due 2016.

If the entire amount of the initial debt financing is provided to A123, the 8.00% Convertible Notes are issued and the full amount of the warrants are exercised for cash, Wanxiang’s total capital investment in A123 from these agreements would total approximately $465 million. The total amount of shares of A123’s common stock issuable upon exercise and conversion of the warrants and 8.00% Convertible Notes would represent approximately 80% of the fully diluted common stock of A123 outstanding at that time.

Lazard served as financial advisor to A123 for the above-described transactions.

Comments

HarveyD

This will make A123 about 80% Chinese. It may be one of the best way to ensure survival and lower cost mass production when the majority of the facilities are moved to China. Let's face it, China may very be the largest EV batteries market by 2015. It is logical that battery packs are built there. Some R & D and sales offices (for local market) could stay in USA.

kelly

Just watch the Republican's, who screamed about the Solyndra loan -lost through Chinese solar cell 'price dumping', now scream about driving key advanced US battery makers(think Boston Power also) into China.. arguing with Nazis..

Brotherkenny4

Wanxiang has a number of manufacturing facilities in the US and employ many US citizens. I'll bet they are still interested in manufacturing in the US too.

Kelly, it only matters that this administration did it. It doesn't matter what it is, if it was Obama's, it must be bad and driven to fail.

Your correct about the hyprocrisy (I wish there was a simpler word for hypocrisy, because I don't think most of the republican base knows what it means and so don't really understand that when someone says the GOP is hypocritical that it means we are on to them). The GOP whined about the wasted federal dollars on the things like batteries, but now say tax payer money has funded secret IP that will be taken by the Chinese. Although, what I really think they fear is that the Chinese will turn a profit in an industry they have tried to kill (which could make them look bad if anyone is paying attention, but I don't think they should worry, the attention span of Americans is short). The politicians of China are not owned by oil and coal. So what they have done, is tried to kill the battery companies and are now upset that opportunity is gone. How can congress kill the battery industry when China owns it, and China will soon be the largests economy in the world? The answer is they can't. That's gotta really anger the minions of oil. I guess though, that they never really cared about the US, but really just about getting themselves rich, and I am sure that happened, so I suppose they will be personally happy with their wealth. Good for them, our rich leaders and supporters of the status quo. The future has sailed to China with their help, but they got theirs.

kelly

Brotherkenny4, not just batteries - multiple choice:

When the US population has had ~20% of it's lifelong income federally "withheld" for old age security, what is a "clean slate" social security budget?

A. Convict lingo
B. Congress lingo
C. The 'privatized' final solution
D. Romney/Ryan social security

HarveyD

To the 3% with most of the wealth in USA, it doesn't really matter how many manufacturing facilities move from USA to China, India, Mexico, Brazil Eastern Europe etc. In reality, moving to lower cost labor countries is often the way to increase their profit margin and wealth. That's what USA used to be with local color labor and Mexican immigrants and that's what Germany still is with temporary labor from Eastern Europe, Turkey etc.

USA's and Western World people with $$$$ have already invested heavily outside their country of origin and will continue to do so as long as befriend (paid-purchased) politicians let them do it. Since there are more and more of those around, the closing of local manufacturing facilities will go on until the 97% has had enough.

Herm

I wonder if there is a way to confiscate the wealth of the 3% without killing the golden goose?.. not everyone in the future can be a public servant or work at McDonalds. I guess the planet would be better off going towards a 3rd world lifestyle. There would be fewer Cadillacs with V8s on the road.

Roger Pham

@Herm,
Good many points! The wealth of all savers is already gradually being confisticated via the back door, by the gov.'s continually running huge budget deficits and printing of money to make up for lost revenues. The political parties meanwhile are still competing with each other as to who can cut the most taxes and who can dole out the most benefits to bloat out the government's entitlement budget even more. The Robinhood scheme is already in progress!

Yes, the plane will definitely would be better off going towards a 3rd-world lifestyle, but would the people's lives be better off? First there will be unemployment to the tune of 25-30% or higher officially, while real unemployment in 3rd world countries may run as high as 50%, as well as increasing youth unemployment above 50% that prompt major social unrests like the Arab Springs and the bloody civil war in Syria right now! The SAudis are platicating their people with oil revenues, but wait until this oil money will run out. And then, there will be crimes and murders and extortion by youths joining organized crime due to unemployment.

A much better way than "going third world" would be to develop all-renewable energy economy and environmentalism of recycling everything and rebuilding our neglected ecosystem. This will create billions of jobs world-wide while assuring humanity with a bright, clean, and sustainable future!

Roger Pham

Correction to above: "the planet will definitely would be better going towards a 3rd-world lifestyle,..."

kelly

"I wonder if there is a way to confiscate the wealth of the 3% without killing the golden goose?.." Herm, there is. Think about actual 'no loopholes' progressive taxation.

Extremes are fatal.

Should one man eat ten times more than another, have a dozen times higher heart rate than normal, exhibit five times the typical blood sugars, .. nature kills off the aberration.

No human has more genes than another.

Western society is defined by "moderation in all things" and "in God we trust" and "money is the root of all evil", yet the present hideous difference between rich and poor is even greater than in the feudal times of serfs.

Such extremes kill the organism.

If someone works twice as many hours, pay him twice as much, but no man can work a hundred times as many hours.

But some countries, particularly the US, have individuals re-writing the rules with money, which results in the few hoarding the resources of the many.

Excess only breeds decadence.

If one thinks they are better, having ten times more than the average person will impress.

But having hundreds of times more than normal is detrimental the whole.

And having thousands of times more is fatal to a society and should be treated as the societal disease and aberration extreme wealth inevitably is.

Roger Pham

Totally true, kelly. Kings and aristocrats in their days owned vast amount of wealth akin to billionaires and dictators of today. Yet, these great wealths also sometimes lead to their downfalls, such as King Louis XVI who was deposed and guillotined during the French Revolution, Napoleon Bonaparte, as well as Sadam who owned and nationalized all his country's petroleum resources.

In a modern-day democracy, the super riches usually own the government so it is very difficult to confiscate wealth from them. In a dictatorship, the dictator usually owns everything, and the super-rich from previous regimes are usually put in jail, such as in Russia wherein Mr. Khodorkovsky, the former billionaire owner of Yukos oil was jailed and his fortune confisticated.

kelly

Thanks RP, its hopeful knowing others find history has similar conclusions. Sneaking social truths into days old comments.

Frankly, ninety some percent(90+%) of us are obviously being screwed by the rich.

It always amazed me that veterans in particular, having been seriously, effectively, and expensively trained to neutralize whatever threatens them, just rollover.

While DC and Wall Street eat hundred dollar meals, 50 million Americans suffer early and painful deaths, unable to afford the basic medical care they need.

If the desperate are driven to targets, there are one's more deserving than random theater goers.

HarveyD

It is comforting to read that many posters are starting to see where the current 'business as usual' is leading the nation. One could say that 97+% are being screwed by the other 3%. It may soon become 99% vs 1%. That will be very close to what it was under King Louis XVI and consorts.

The funny thing is that we immigrated to North America to run away from wealthy all powerful Kings and Lords but after 300+ years we recreated about the same exact situation. We wrongly thought that the Constitution would protect us. The 3% found ways around that too. Our billionaires ( and their children and grand children) are effectively replacing the Kings and Lords of yesterday. Our politicians have become their (paid) puppets and they are ruling remote control like and getting richer and richer. Currently, 400 billionaires have higher income than 50% of all Americans. That was in 2010, by end of 2012, the same 400 to 450 people may earn more than 198,000,000 average Americans because they are getting richer and the average American is getting poorer and deeper in debt.

Some 50 years ago, top directors CEO earned 4 to 6 times more than the average worker. Today, they earn 300 to 324 times more even if their company is going bankrupt.

It that what humanity is or how it should be? If so, our good old Kings and Lords should have been kept in place.

HarveyD

I forgot, many of our top CEOs earning 300+ times the average worker, pay less than 13% income taxes (or none at all) while the low wage workers pay 33% to 36%.

One of them has the nerve to try to become the next president.

kelly

Along these investment lines: http://www.youtube.com/watch?v=Khos-ZRlDyo&feature=player_embedded#! Dear Taxpayer

and

http://www.youtube.com/watch?v=hEd8p7a1M1Y - sound track by JFK, a man first recognized wars of fear, be they dominoes, WMDs, or countries with possible future nuclear capability.

kelly

"I forgot, many of our top CEOs earning 300+ times the average worker, pay less than 13% income taxes (or none at all) while the low wage workers pay 33% to 36%.

One of them has the nerve to try to become the next president."

HarveyD nailed it. The 99+% are taxed to provide the shackles the 1% legislate on them.

Billion and trillion dollar US weapon and surveillance systems are NOT needed to track a few thousand terrorists. Such massive systems can ONLY have the purpose of tracking the 99% to maintain the 1% rich.

Presently, the richest 400 US $million/billionaires have more money than the lower 150 MILLION US citizens.

History thought kings were rich.

The US Congress and Dept. of Justice have been in contempt of court, the US Constitution, and the People for years, yet, like dictators, they are getting away with it:

http://en.wikipedia.org/wiki/Patriot_Act

http://blog.alexanderhiggins.com/2012/08/12/obama-contempt-violating-ndaa-detention-ruling-166451/

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