Automotive lithium-ion battery maker A123 Systems, Inc. (AONE) Tuesday agreed to sell its automotive business assets to Johnson Controls, Inc. (JCI) in a deal valued at $125 million. In order to facilitate the deal process, A123 Systems also filed for Chapter 11 bankruptcy protection. Following the announcement, A123 shares are plummeting nearly 74 percent in early deals.
The deal is primarily subject to, among other things, higher or otherwise better offers to purchase any or substantially all assets of A123, court approval, and antitrust approval.
A123 Systems, along with all of its U.S. subsidiaries, has filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the District of Delaware. The company said that its subsidiaries located outside the U.S. were not included in the filings.
"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," A123 CEO David Vieau said in a statement.
The bankruptcy filing will help A123 Systems to ensure an orderly sale of the assets to Johnson Controls in a controlled, court-supervised environment under Section 363 of the Bankruptcy Code, which will in turn help maximizing value of the assets for its stakeholders.
The deal will see Johnson Controls acquiring A123's automotive business assets, including all of its automotive technology, products and customer contracts as well as its facilities in Livonia and Romulus, Michigan.
Johnson Controls will also acquire A123's cathode powder manufacturing facilities in China, and its equity interest in Shanghai Advanced Traction Battery Systems Co., a joint venture with Shanghai Automotive.
Meanwhile, Johnson Controls intends to license back to A123 certain technology for its grid, commercial and government businesses.
"Our interest in A123 Systems is consistent with our long-term growth strategies and overall commitment to the development of the advanced battery industry," said Alex Molinaroli, president, Johnson Controls Power Solutions.
Molinaroli sees A123's assets complementing Johnson Controls' existing portfolio and advancing its position as a market leader in the industry with requirements for more energy efficient vehicles continuing to increase.
As part of the deal, A123 has received a commitment from Johnson Controls for $72.5 million in "debtor in possession" financing to support its continued operations during the pendency of the sale process.
A123 needs the funds for continued payment of employee wages, salaries and health benefits without interruption. A123 is also expecting to continue operating and working with customers and suppliers.
A123 noted that it is also actively pursuing strategic alternatives for its grid, commercial, government and other businesses and operations, with several potential buyers showing interest and multiple parties submitting bids for these businesses.
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