Battery firm files for bankruptcy, inks asset sale to Johnson Controls

October 16, 2012 - via Mass High Tech

Lithium-ion battery and systems maker A123 Systems said Tuesday it will sell off its automotive business assets to Glendale-based Johnson Controls Inc., simultaneously filing for Chapter 11 bankruptcy protection in a deal valued at $125 million.

The agreement comes just two months after A123 (Nasdaq:AONE) said it struck a deal with China-based auto parts maker Wanxiang Group that involved debt and warrants worth up to $450 million. That deal faced political opposition, as at least one elected official publicly criticized the possibility of a foreign company controlling a U.S. technology company that had received taxpayer support.

A123 Systems announced the Johnson Controls deal Tuesday in a statement on its website. The exact status of the Wanxiang deal was not clear – A123 on Monday announced it had missed a debt payment to Wanxiang – but A123 chief executive David Vieau now says the deal will not go forward.

A123's stock plunged 74 percent on the news – to 0.06 cents per share. The company closed Monday trading at 24 cents per share. At its peak, shortly after its 2009 IPO, A123 had a market cap of about $2.3 billion. As of this morning, the company's market cap is under $11 million.

“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,” Vieau said in a statement. “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.”

Now that it has nixed the agreement with Wanxiang, and in order to sell off its assets in a controlled environment, A123 and its U.S. subsidiaries have filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the District of Delaware.

Included in the Johnson Controls purchase are A123 facilities in Livonia and Romulus, Mich., and China, its interest in Shanghai Advanced Transaction Battery Systems Co., and all of the company’s auto technology, products and contracts. As part of the proposed deal, Johnson Controls has committed $72.5 million in debt financing to continue A123’s operations during the pending sale.

The Waltham, Mass., company has had a roller coaster year since it first announced in December 2011 that it had battery defect. Customers then began recalling vehicles which used the battery system made by A123. In March, A123 began replacing the defective batteries. Several lawsuits, however, followed. Things started to turn around for the company in June when it received $50 million in funding and and the investment from Wanxiang, which many thought would save the company.

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Author:Patricia Resende

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