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Johnson Controls to acquire automotive assets of Li-ion maker A123 Systems for $125M; A123 and US subsidiaries file for Chapter 11 bankruptcy

16 October 2012

A123 Systems, Inc., a developer and manufacturer of advanced Nanophosphate lithium iron phosphate batteries and systems, has entered into an asset purchase agreement with Johnson Controls, Inc. in a transaction valued at $125 million.

Under the agreement, Johnson Controls plans to acquire A123’s automotive business assets, including all of its automotive technology, products and customer contracts; its facilities in Livonia and Romulus, Michigan; its cathode powder manufacturing facilities in China, and A123’s equity interest in Shanghai Advanced Traction Battery Systems Co., A123’s joint venture with Shanghai Automotive. The agreement also includes provisions through which Johnson Controls intends to license back to A123 certain technology for its grid, commercial and government businesses.

A123 also continues to engage in active discussions regarding strategic alternatives for its grid, commercial, government and other operations, and has received several indications of interest for these businesses.

To facilitate the transaction process, A123 and all of its US subsidiaries today filed voluntary petitions for reorganization under Chapter 11 of the US Bankruptcy Code in the US Bankruptcy Court for the District of Delaware. A123’s subsidiaries located outside the US were not included in the filings.

A123 said that the bankruptcy filing will allow it to provide for an orderly sale of the automotive business assets and all other assets and business units under Section 363 of the Bankruptcy Code and enable it to maximize the value of its assets for its stakeholders in a controlled, court-supervised environment.

In conjunction with the proposed transaction, A123 has received a commitment from Johnson Controls for $72.5 million in “debtor in possession” (DIP) financing to support continued operations during the pendency of the sale process. A123 has filed a number of customary motions seeking court authorization to continue to support its business operations during the transaction process, including the continued payment of employee wages, salaries and health benefits without interruption.

We believe the asset purchase agreement with Johnson Controls, coupled with a Chapter 11 filing, is in the best interests of A123 and its stakeholders at this time. We determined not to move forward with the previously announced Wanxiang agreement as a result of unanticipated and significant challenges to its completion. Since disclosing the Wanxiang agreement, we have simultaneously been evaluating contingencies, and we are pleased that Johnson Controls recognizes the inherent value of our automotive technology and automotive business assets. We are also pleased that we have received indications of interest that recognize the value of our grid and commercial businesses. We are encouraged by the significant interest we have received, as multiple parties have submitted proposals for these businesses. As we move through this transaction process, we expect to continue operating and working with customers and suppliers.

—David Vieau, Chief Executive Officer of A123

A123 had earlier filed an 8K with the SEC saying that it would be in default on payments to Wanxiang, and that bankruptcy was an option. (Earlier post.)

Our interest in A123 Systems is consistent with our long-term growth strategies and overall commitment to the development of the advanced battery industry. Requirements for more energy efficient vehicles continue to increase, which is driving automotive manufacturers to pursue new technologies across a broad spectrum of powertrains and associated energy storage solutions. We believe that A123’s automotive capabilities are a good complement to our existing portfolio and will further advance Johnson Controls' position as a market leader in this industry.

—Alex Molinaroli, president, Johnson Controls Power Solutions

The transaction with Johnson Controls is being completed pursuant to Section 363 of the US Bankruptcy Code and is subject to, among other things, higher or otherwise better offers to purchase any or substantially all assets of the company, Court approval, antitrust approval, any other such approvals as may be required by law, and other customary conditions. Given these conditions, there can be no assurance that the proposed transaction will be consummated, the company cautioned.

October 16, 2012 in Batteries | Permalink | Comments (13) | TrackBack (0)

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Comments

Nice catch for JC. Is 24M in this too?

How can you sell first and than go Chapter 11? Somebody must be getting screwed here.

In my opinion a takeover of A123’s automotive unit by a large automotive supplier like Johnson Controls is good news. A123 has a competitive product (high power, high temperature and high durability cells) and they will benefit from Johnsons experience with product quality controls and mass production. Also this will be good news for Fisker that may otherwise be without a battery for their car. One bankruptcy could lead to another if A123 production is not continued in another company ASAP. Selling to China will probably get a better price for A123 stockholders but it may be mission impossible as national security is at risk with a company like A123. Also A123 is probably the best hope that the US has to become a serious player in the increasingly important industry for automotive batteries otherwise dominated by Panasonic and LG Chem. In a few decades that industry could grow into one of the largest industries in the world with sales of possibly over 300 billion USD per year.


Henrik - Well said!

yes..

Yes, consolidation/takeover in the 30+ non-Chinese and 30+ Chinese EV batteries manufacturers is not surprising and expected. Larger entities can scale up production, increase performance and reduce cost.

Will the winners come from Japan, South Korea, China, India, EU or USA?

EU and USA may have to join their efforts (merge/consolidate etc) to match Asian manufacturers? A123/JC take over may be one (first) necessary move.

A123 is already manufacturing its cathode material in China, so unless the bulk of the IP is in other parts of the cell or its processing, the Chinese have most or all of what they need to take over A123's markets.

We should not be allowing uncompensated technology or knowledge transfer to China.

It is progressively becoming very easy for China to pick up (at very low price) hundreds of USA's industries going bankrupt. It is even easier when many of those industries have already moved their manufacturing facilities to China.

China has accumulated $$$$$$B of USA dollars and bonds and their currency is stronger than ever. That makes purchasing of USA's and EU's firms in financial difficulties appealing and easy.

Not so sure who would win a trade war. Everybody would lose.

We could just make China pay for the misappropriated IP.  Transferring some of their Treasury bonds to the victims would do.

The world may need unrestricted open IP markets where everybody could bid and buy. Offer and demand would determine the price.

Speculators would have a field day but that's what is going on for most other goods, commodities and derivatives?

The make it fair, all IP and Patents would be listed and be available for sale to the highest bidders much like the current $646 T derivatives.

OTOH Chinese have worked very hard during the last 5 to 6 decades to accumulate the collective wealth they now have. As such, they deserve our praise. Their millionaires and billionaires may be as deserving as ours even if not (yet) as numerous.

Under the current rules, A123 sale to JC could be stopped if a better offer shows up in the next 30 to 90 days or so?

Will our patriotic private industry outbid Chinese bidders in order to maintain A123 as a local battery producer or will external bids be blocked for so called security reasons?

The latter is very possible?

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