A123 Systems reaches agreement to sell substantially all assets to Wanxiang for $256.6M
09 December 2012
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
If Wanxiang tries to shutter any American parts of the company, the FEDS should demand full repayment of any loan money A123 got or else seize assets of equal value and resale them.
I'm not one to shy away from a little early gov't help to a startup industry if we think it's in our long term, strategic interest, but I'll be damned if I'll support a Chinese company profiting from US tax dollars if they take the jobs overseas.
Posted by: DaveD | 09 December 2012 at 03:43 PM
DaveD, your point is correct and common sense, but hopeless in the USA.
Bain(Romney) vulture capitalism leveraged financial control of US corporations, bankrupted them through massive 'service fees' and debt, then pocketed the vested employee pension funds.
Through US bankruptcy laws, the US unions were busted, US employment sent offshore, and any pensions salvaged are paid by the US taxpayer through the federal Pension Benefit Guaranty Agency.
Mitt refers to this shakedown as 'turning around' a company.
Do you really think he EARNS $54,000 a day from his honest work and investment?
Posted by: kelly | 09 December 2012 at 05:49 PM
There was an attempt on the part of Democrats in Congress to stop tax breaks for companies exporting jobs but Republicans blocked it.
As long as Republicans hold the House of Representatives I doubt you'll see any action to protect American jobs or keep American money home if it would happen at the expense of their corporate sponsors.
Mitt was a pioneer of outsourcing jobs to China.
Posted by: Bob Wallace | 09 December 2012 at 06:43 PM
Sigh. Sadly, you're both right. Somehow, "middle America" and the deep South have begun to believe that big business is the same thing as their "party" and they support what the GOP has become for the wrong reasons.
The GOP speaks to their fears and hatreds of others and groups it all in with their religious beliefs somehow and they don't realize they're voting against their own self interest. The people they support get rich from outsourcing their jobs. Very sad.
As a fiscal conservative, I don't like how far the Democrats will go towards programs, but they're not as unreasonable as the Republicans right now so it's a lesser of evils type choice, and the GOP is NOT a lesser evil the way it's presently built. Just my opinion of course.
Posted by: DaveD | 09 December 2012 at 06:54 PM
kelly...while you may be close to 100% correct, there are 10+M sharks in USA who would not hesitate to do the same as Mr. Bain (Romney).
In the near future, we will see many more Asian and middle east firms and government funds buying bankrupt (or low cost) USA-EU-Canada firms. That's what happens when you live it up and spend $$$$B more than what you have, years after years.
Canada approved $20+B sales of natural resources to Asian firms 2 days ago and that's is just a start. By outsourcing manufacturing to Asia, we effectively moved $$$$$B/year out and outsourced wealth. Some of it is being use to buy huge assets month after month.
Posted by: HarveyD | 09 December 2012 at 06:58 PM
Sooo what the heck happened? Why did A123 die? Their tech was too bleeding-edge and faulty? They were a bake-and-eat company? ...what happened?
Posted by: Ben Frigo-Vaz | 09 December 2012 at 08:23 PM
My understanding is that A123 got to market with the most advanced battery at the time but over time other manufactures caught up with them. And because the other manufactures were larger, with deeper pockets, they grabbed the business.
That is something that I read a few days ago but I've got no link. Treat that as an unconfirmed rumor and a place to start looking.
Posted by: Bob Wallace | 09 December 2012 at 10:54 PM
Searching some (through a lot of right-wing crap about how the government should never do anything) I found this on the MIT site....
"In spite of a close working relationship with GM, A123 lost the contract for the Volt to the Korean giant LG Chem, which used more conventional electrode materials but introduced a novel material to separate the electrodes and improve the safety of the batteries. Since then, A123 has signed several production contracts with major automakers, but those haven’t been very large orders so far—not enough for the company to operate its factories at full capacity, which would have brought down costs. Major contracts for vehicles such as the Nissan Leaf, Ford’s new Focus electric vehicle, and Toyota’s plug-in Prius all went to more established battery makers."
Posted by: Bob Wallace | 09 December 2012 at 11:00 PM
Upper management appears to have screwed the pooch here.
4 months ago Wanxiang offered $460M for 80% of A123. Wanxiang is laughing big time.
Posted by: Dave R | 09 December 2012 at 11:58 PM
So, let me see if I have this right.
Ever since Obama took over from Bush a few short months ago, Romney has screwed things up.
And then the Republicans really screwed things up when the Democrats had control of the presidency AND congress.
What is even more humorous are the feeble attempts to blame the present administration, when they have clearly done nothing.
The Republicans always say they want less government – well, be careful what you wish for.
And the US Gov should demand full repayment of any loan money A123 got or else seize assets of equal value and resell them. . . Using, I assume, the Strategic Asset Nationalization law passed decades ago in Nicaragua ?
Posted by: ToppaTom | 10 December 2012 at 04:32 AM
"4 months ago Wanxiang offered $460M for 80% of A123. Wanxiang is laughing big time."(vs 256.6M now for 100%)
Dave R nailed it. One wonders what the corporate officers, fed regulators, assorted insiders, etc. got paid to sellout.
Posted by: pat | 10 December 2012 at 07:01 AM
Nope, you don't have it right Tom.
The damage to America, and especially to the middle class, started long before even Bush came to office.
It started when some TV cowboy convinced people that we should take the controls off the greedy and let them run wild.
"Less government" is shorthand for transferring money from your pocket to the very wealthy.
Posted by: Bob Wallace | 10 December 2012 at 09:52 AM
Too many dishonest speculators wanting to joint the 3% and faltering worn out democracies are creating unsustainable 'moneycracies'.
They will sink most democratic systems if nothing is done to keep them in check.
All bankrupt or near bankrupt firms who got government handouts should be turned over to the government for disposal and liquidation and to recover most/as much of the funds invested.
Posted by: HarveyD | 10 December 2012 at 09:55 AM
a123 died BECAUSE of the massive loan.. as it forced them to expand far too soon in order to get the loan and then they didnt have enough sales to pay the way.
As for romney and gang... alot of people feel its perfectly ok if SOME companies and even some old industries die off specialy if they are poorly managed.
Also people in the south likely liked it because after the plants in the north closed... new plants opened in the south.
Posted by: wintermane2000 | 10 December 2012 at 09:56 AM
It's fine for poorly managed companies and outdated industries to die off.
It's not so fine to have vulture capitalists playing Dr. Kevorkian, uninvited.
When you have people with access to capital "helping" capital-strapped companies by sucking off their value and causing them to fail, well, that's just not right.
"new plants opened in the south" is another way of saying that middle class people are going to have to work harder for less money and less benefits.
It's too bad that working and middle class people who hate unions couldn't be transported back to work a few years in the pre-union times.
Six day work weeks, twelve hour days, dangerous working conditions - it's a "right to work" dreamland.
People gave their lives for your forty hour week and overtime pay. For your pensions and health care benefits.
Posted by: Bob Wallace | 10 December 2012 at 11:24 AM
"a123 died BECAUSE of the massive loan"
Let me suggest that A123 died partially because of the 2008 recession.
Had we not encountered the second most severe economic downturn post the Civil War the sale of EVs/PHEVs would have grown faster than has happened.
The economic crash of 2008 essentially stopped new car sales. We almost lost the entire American car manufacturing industry.
Posted by: Bob Wallace | 10 December 2012 at 11:28 AM
Why is this digressing into politics? Is it possible A123 bankruptcy had nothing directly to do with unions, democrats, republican, Mitt Romney, vulture capitalists, etc? A123 seemed to have promising battery tech with excellent lab tested cycling life and safety, what happened? Did they over sale? Get loans they could not pay off? Were they outbid by competitors with less advanced but cheaper battery designs? What to become of their patents and factories?
Posted by: Ben Frigo-Vaz | 10 December 2012 at 12:19 PM
Ladies and Gentlemen! Please, cut the political crap. If approved by the Government the company will be sold to Chinese with all technology etc. If gov. consideres that it is stupid then the deal will go to the next bidder. If not so be it. We (USA) do this stupid thing again and again for years. We develop the technology but somebody else uses it. Unless hit hard we are not going to learn a lesson. We are not going to effect a thing being either GOP or Dems.
Posted by: CarCrazy | 10 December 2012 at 12:21 PM
"4 months ago Wanxiang offered $460M for 80% of A123. Wanxiang is laughing big time." It was largely the response from congress and the feds that discouraged the original purchase. However, you are correct. Wanxiang got a slightly different deal for $200 million less. Wanxiang's plans would have had most of that investment going to US investers and companies. So basically, the fake concern on the part of our federal leaders led to 200 million less being injected into our economy and Wanxiang still gets the tech. Well done all around, definitely what the oil companies were looking for from their public servants.
Posted by: Brotherkenny4 | 10 December 2012 at 12:26 PM
Ben it has more to do with a stupid politico and a stupid management then politics itself. The loan because of its size and because of what it stipulated to get the loan forced a123 to stretch itself incredibly thin at a time every smart person knew one shouldnt do so. Blamo. At the time when I read it I thought someone who hated bevs had written it up as it was taloir made it seems to me to kill the company.
Posted by: wintermane2000 | 10 December 2012 at 12:46 PM
Well then why did they take a loan they could not pay-off, were they guaranteed to fail if they had choose to forgo the loan?
Posted by: Ben Frigo-Vaz | 10 December 2012 at 01:15 PM
"It started when some TV cowboy convinced people that we should take the controls off the greedy and let them run wild. "Less government" is shorthand for transferring money from your pocket to the very wealthy."
Bob W, one could go even further back in the Republican party to Nixon's, "..HMOs, pay more for less healthcare.. I like that." White House/Watergate recordings to Haldeman.
Posted by: pat | 10 December 2012 at 01:57 PM
"The final sale to Wanxiang is subject to approval by the bankruptcy court. A hearing is currently scheduled for 11 December. Sale to Wanxiang is also subject to review by the Committee for Foreign Investment in the United States (CFIUS) and requires approval by the US government." So, still there is a chance that it will stay in USA.
Posted by: CarCrazy | 10 December 2012 at 01:58 PM
CarCrazy.....could it be the USA/Canada and EU have priced themselves out of many competitive mass production markets?
Will outsourcing last as long as we take to adjust/lower our mass production cost to match Asia's or as long as Asia's production cost has not gone up as high as ours?
That may take another 20 to 40 years. If so, it will be a very long recession? Instability and upheavals may happen in many industrial countries.
The other alternative is a worldwide direct and or indirect extended trade war that nobody really wants?
Mass production cost are inherently lower (for many reasons) in Southern States. A move their could be a partial solution.
Posted by: HarveyD | 10 December 2012 at 02:14 PM
Ben I think they just took a leap of faith...
Posted by: wintermane2000 | 10 December 2012 at 05:11 PM