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US: Wanxiang “still interested” in A123 Systems

Reuters has reported that Wanxiang Group, whose US$465m bid for the ailing US lithium-ion battery maker A123 Systems was ended this week when the target filed for Chapter 11 to smooth the path towards the takeover of its automotive business by Johnson Controls (JCI), remains interested. The agency quoted Pin Ni, head of the Chinese … Continued

Reuters has reported that Wanxiang Group, whose US$465m bid for the ailing US lithium-ion battery maker A123 Systems was ended this week when the target filed for Chapter 11 to smooth the path towards the takeover of its automotive business by Johnson Controls (JCI), remains interested. The agency quoted Pin Ni, head of the Chinese Tier 1 supplier’s US subsidiary, on whose loans A123 expected to default, saying: “Wanxiang’s goal and interest remains the same.”

A123 has agreed subject to various conditions, including bankruptcy court approval, to sell the assets of its automotive operations, including two Michigan production facilities, to JCI for US$125m. A123 says it has also received expressions of interest from other potential bidders for its non-automotive energy storage assets.

It was not clear to Reuters “just how Wanxiang could get back into a deal to acquire A123,” though it reported a Jefferies analyst, Peter Nesvold, in a research note for investors, suggesting that “Wanxiang is the most likely other participant (besides JCI) in this process, and we are not aware of other suitors at this time.” Nesvold added that “The deal could be countered by other offers that would be more beneficial to A123’s creditors.” The Chapter 11 bankruptcy process being obligatorily formally reported, more light may be shed on the future ownership of A123 Systems in due course.

Before A2123 Systems defaulted on existing loans from Wanxiang, the availability of future investments from the Chinese would-be buyer were contingent, inter alia, on A123 obtaining the approvals of the Committee of Foreign Investment in the US (CFIUS) and of the Chinese government for the change of ownership. The Wall Street Journal (WSJ) suggested that government approvals required for the Wanxiang-A123 deal had not be obtained by a 12 October deadline, when A123 Systems had notified investors of the possibility of the firm not meeting its creditors’ loan repayments due on that date. The CFIUS, comprising representatives from nine different US federal agencies, reviews transactions involving foreign corporations that could affect US national security, and had given A123 until 23 October to respond to certain queries. The WSJ noted that A123 had won military contracts, including a project to develop an advanced battery for military applications.

Meanwhile, aside from Wanxiang, General Electric is among the losers in the Chapter 11 filing of A123 Systems and the prospective takeover of its automotive battery business by JCI, the WSJ has also reported. It says GE made seven investments totalling US$70m in A123 before its 2009 IPO, and GE’s research head Mark Little is a member of A123’s Board of Directors. GE Asset Management Inc. is listed as A123’s second biggest shareholder, with a 4.32% stake.

The WSJ said GE declined to comment on the bankruptcy filing on 16 October. In April 2009, at the time of GE’s seventh investment in A123, GE Chief Executive Officer Jeff Immelt said in a GE news release: “GE’s capital, resources and technology expertise will help A123 scale up faster and more efficiently.” The WSJ believes that GE is unlikely to recover any of its investment in A123.

 

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