A123 Systems, Inc., a developer and manufacturer of advanced Nanophosphate lithium iron phosphate batteries and systems, announced that it has entered into an asset purchase agreement with Johnson Controls in a transaction valued at $125 million.
Under the terms of the agreement, Johnson Controls plans to acquire A123’s automotive business assets, including all of its automotive technology, products and customer contracts; its facilities in Livonia and Romulus, MI; 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 Johnson Controls intends to license back to A123 certain technology for its grid, commercial and government businesses. A123 also continues to engage in active discussions regarding strategic alternatives for its 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 U.S. subsidiaries 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’s subsidiaries located outside the U.S. were not included in the filings. This action is expected to allow the company 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 the company to maximize 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 Johnson Controls for $72.5 million in debtor-in-possession financing to support the company’s continued operations during the pendency of the sale process. The company has filed a number of customary motions seeking court authorization to continue to support its business operations during the transaction process, including the continued payment of employee wages, salaries and health benefits without interruption.
“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,” said David Vieau, CEO of A123. “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. 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.”
Latham & Watkins and Richards, Layton & Finger are serving as legal advisors, Lazard is serving as financial advisor, and Alvarez & Marsal is serving as restructuring advisor to A123.