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

16 August 2012

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.

August 16, 2012 in Batteries, China | Permalink | Comments (24) | TrackBack (0)

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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.

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..

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.

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

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.

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.

@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!

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

"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.

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.

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.

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.

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.

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.

"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/

Our government is non-functional as a democracy. History has shown that governments survive as long as the masses allow them to -- democracy, dictatorship, or kingdom. When enough people are desperate enough, things will change -- maybe not for the better, those in power will no longer be in power. I hope we don't reach that point.

That point may or may not be reached.

It depends on the corrective actions taken to redress current abuses. A very thick fire wall must be installed between politicians and $$$$. The fire wall must be so tight that nobody can/will contribute more than a total of $10 to politicians. The Treasury could add another $2 to $5 per voter. All direct and indirect election contributions must be positively controlled to avoid ALL current abuses.

All current financial support/subsidies, hand outs and tax credit to business must be converted into loans with fair interest rates. The net cost to government (and people) must be zero or less. A small profit should be possible.

The taxation and pay system must be completely reviewed. All loop holes must be removed. People making more than $100K must progressively pay more taxes. Luxury items that they normally buy must be taxed relatively more. Capital gain and dividend revenues must be taxed as all other incomes sources. An exchange tax should be applied on stocks sales/purchases, real estates sales/purchases, banking transactions etc to pay off the huge national debt.

Low income earners must be taxed a lot less. Negative income tax could be used in many cases instead of social welfare.

IMHO, job and advancement opportunities are more important than income redistribution. The latter was tried and failed in former communist countries. Taking money away from the rich unfairly is akin to pushing away the goose that lays the golden eggs. The rich will relocate and recreate innovation and wealth somewhere else in the world, and your country will be left with a stagnant economy and lack of innovation. The poor won't mind the presence of billionaires, as long as these super-rich help create jobs for the poor and maintain a healthy economy. By the same token, excessive and burdensome regulations will increase the cost of doing business and will force businesses and manufacturing to move away. However, some degree of regulations are vital to protect the environment, the workers, and human rights, and must be enforced. Goods made from countries with less regulatory burden than ours must be subjected to tariff in order to level the playing field for our manufacturers and our workers or else they will fail and jobs will be lost. Countries with similar degree of regulations as ours will be tariff-exempted in order to help our exporters and to maintain a high degree of competitiveness to spur innovations and affordability of our products.

In other words, the government's role must be mainly that of a referee to maintain a fair and level playing field in order for everyone to compete. The gov. must guarantee equal opportunities, but cannot guarantee equal outcome, or it will fail miserably. THe gov. cannot take sides or pick and choose winners, because this will fail more often than not. Solyndra is one prime example and many more to come! In most third-world countries, the gov. there are very corrupt, in which relatives and friends are promoted in high places instead of more qualified people. This has obviously led to government failures and economic failures and brain drain to countries with better and more fair governments.

The bottom line is to use the KIS principle and keep everything very simple by maintaining a simple and basic level of fairness with clearly-defined rules of engagement, and with fair and prompt enforcement of the rules. Things start to breakdown when the rules and laws are so complicated with so many loopholes, as in the new 2,700-page health care regulation, that people get discouraged and demoralized when only the top businesses hiring the top lawyers can afford to do business.

>>>"A very thick fire wall must be installed between politicians and $$$$"

That may discourge people with high-leadership ability from entering public service, because they can run private corporations and earn tens of millions USD yearly (and increasing salaries and bonuses and golden parachutes etc). You know that private executives earnings are much higher than several decades ago, in real dollar value. In comparison, US presidents earn merely $400,000 yearly but are burdened with so much work and stress that their hairs turn white after 4 years in office. Who would want that? A good medical doctor, dentist, or lawyer can easily earn that, or even 2-3 x that number, with less stress.

US Congressmen and Presidents should have salaries in the millions and even tens of millions yearly in order to draw talents from the private corporations. They should receive additional bonuses if the economy and jobs are gaining, or pay deduction if the economy and job market are weakening. Pay deduction can happen even after they left office, for example, GWB, if paid tens of millions yearly while in office, will have to pay back some of that now and until the economy will pick up because he scr*wed up our economy and our job market so badly...

That kind of salaries should insulate politicians somewhat from bribes and private donations. Once you are paid enough to support a number of mistresses and having resort houses everywhere and have your own private jets etc., then you would care more about not risking your job and would be more restrained from accepting bribes.

Since it would cost millions to run for public offices, a good system of public funding for campaign should be designed to give highly-qualified candidates enough campaign resources to win against privately-supported candidates. Private campaign donations should not be restricted because that was rules as freedom of speech by the high court? And freedom is everything, especially freedom of expression, and campaign donation is akin to freedom of expression...you express your belief in a person who perhaps may have a chance to help you realize your hope, dream and belief!

Agree with you the elected politicians should be paid a lot more. It is grossly unfair to pay USA's president only $400K/years. It should be at least $5 to $10M/year. Senators and House members should also get a lot more. Something like $1M to $2M/year would be fair.

However, I do not agree that buying politicians (directly or indirectly) is part of freedom of expression or speech. It should be a major crime instead. Trying to influence elections with $$$$ should be made a major punishable crime. Punishment could be proportional to the $$$$ or equivalent used.

Of course, election reasonable expenses should be paid by Treasury at a reasonable rate ($2 to $10) per voter. A strict control on $$$ spent is possible.

The 97% (soon to be 99%) could read 'Twilight of the Elites' by Chris Hayes to find out:

How USA has now become an Aristocracy of Elites (billionaires)

The rise of extreme inequality in the last 30 years.

The increasing wealth gap between the 1% and 99%

...and a few essential corrections:

Raising taxes to 50% on high revenues.

Reducing taxes closer to 0% on low revenues.

Raising minimum wage to $12/hour (very negative for competition?)

@HD,
Campaign donation helps mainly to bring the candidate to the public attention, by buying media times and travel expenses and campaign staffing. If public financing of campaign expenses is generous enough, then those who accept private donations do not have any advantage, and the contest is more about the merits of the candidate than about the money spent. Beyond a certain amount of campaigning fund, more money does not give a candidate additional advantage.

Extreme inequality has always been around since the beginning of humanity when Chiefs, Kings, Lords, dictators, aristocrats etc. owned everything. Those mentioned have a lot of wifes and mistresses and have a lot of children. Those who are poorer have fewer children. This has been how human evolved and has been working fine for thousands of years, even before civilization, when tribal chiefs have many wifes and a lot more children than anyone else in the tribe. What has failed was when income redistribution was attempted by communism and socialism...failed miserably. The recent use of birth control by the capable and the higher birth rate of those less capable have really affected human evolution in a negative way.

Democracy was invented by the Greeks over 3,000 years ago and failed badly...until resurrected by the USA in 1776...who knows how long democracy will last, given the current devolution of democracy into Idiocracy and the negative progress of human evolution in those Idiocracies that reduces the quality and capability of future generations.

However, everyone in modern society should be given job opportunity and advancement opportunity in order to promote social harmony and to prevent unemployed youths from joining organized crimes and other social degradation.

Progressive taxation can be done at a level whereby the tax rates for the job-creators will not be so high that they are forced to relocate. Let's not push away the goose that lays the golden eggs.

Minimum wage should be agreed upon by a group of countries in a tariff-free trading bloc wherein they have equal degrees of environmental and social regulations. This is so that their manufacturers can have level playing field for fair competition within the tariff-free trading bloc. Minimum wage can be raised if appropriate tariffs can be put on products from countries with lower to no minimum wages, in order for our domestic producers to have the same cost advantage.

Yes, the best food, the best structures, the best roads, the best art pieces and the best political systems will deteriorate with time and or from inside/outside influences. The best very long lasting empires all came to an end. Some lasted over 1000 years but they all when under, most often from mismanagement from within.

The American Constitution was originally charted to reduce the inequalities and have people elect the leaders at regular intervals.

Those two excellent ideas are now meaningless because the 1% or 3% have found ways to nullify the most important parts of the constitution.

RP...it is very difficult to level the playing field between two or more independent countries, even when joined into a free trade agreement. Look at what happened with Canadian wood exports to USA. A 320% tariff was applied as soon as local US lumber companies failed to compete while maintaining their huge profit margins. The larger member seems to impose its view on the smaller one most of the time. Canada will soon join EU in a free trade agreement and will soon ship a high percentage of its surplus Oil to Asia.

USA will try hard to find ways to retaliate against Canada's legitimate trade diversification efforts. Lobbies, with State and Federal government assistance, will introduce legislation to block or apply high tariff on Canadian non-essential and competing products. That's how it has been for centuries.

EU may be one of the very rare real Trade Union. USA/Canada is not.

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