Troubled advanced nanophosphate lithium iron phosphate batteries and systems supplier A123 Systems has confirmed that it has entered into an asset purchase agreement with Johnson Controls (JCI) in a transaction valued at US$125m.
Under the terms of the agreement, JCI 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 asset purchase agreement also includes provisions through which JCI intends to license back to A123 certain technology for its grid, commercial and government businesses.
A123 has said it is continuing to engage in active discussions regarding strategic alternatives for the 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 have filed voluntary petitions for reorganisation 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.
According to A123, this action is expected to 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 maximise 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 JCI for US$72.5m in ‘debtor in possession’ (DIP) financing to support its continued operations during the sale process period. The company has filed a number of customary motions seeking court authorisation to continue to support its business operations during the transaction process, including the continued payment of employee wages, salaries and health benefits without interruption.
David Vieau, Chief Executive Officer of A123 commented: “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 recognises the inherent value of our automotive technology and automotive business assets. We are also pleased that we have received indications of interest that recognise 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.”
A123 Systems had confirmed on 16 August that Wanxiang Group planned to acquire a controlling stake of up to 80%. Under the terms of definitive agreements, Wanxiang planned to invest up to US$465m in A123, which included an initial credit extension of US$25m that A123 expected to receive in the week following the announcement. The full investment from Wanxiang was expected to provide A123 with “the capital necessary to strengthen the company’s competitive position in the global vehicle electrification and grid energy storage markets.”
Commenting on the new deal, Alex Molinaroli, President, Johnson Controls Power Solutions added: “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.”
A123 has cautioned that 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. Accordingly, given these conditions, the company says there can be no assurance that the proposed transaction will be consummated.
