Wanxiang, China's largest maker of auto parts created a political storm when they won the auction to acquire recently bankrupt company, A123 Systems.
Johnson Controls officially withdrew from the bankruptcy auction to acquire portions of A123 Systems when it declined to match a higher bid submitted by Wanxiang. Subsequently A123 representatives have announced they selected Wanxiang's bid of $257 million as the best offer for the total company over a set of competing complementary bids by Johnson Controls for the automotive and government assets and NEC for the grid and commercial assets.
Wanxiang's approach for A123 Systems raised concerns with US Members of Congress. In a recent letter addressed to the US Secretary of the Treasury, Timothy Geithner, members stated "Given that, and in the light of existing A123 contracts with the US Department of Defense, we are concerned that the acquisition of A123 Systems by Wanxiang might constitute a potential threat to US national security." The potential loss of A123's next generation battery technology to a foreign country and the impact on the telecommunications, electric grid and automotive sectors were also high-lighted.
But excluded from the asset purchase agreement with Wanxiang is A123's Ann Arbor, Mich.-based government business, including all U.S. military contracts, which would be acquired for $2.25 million by Navitas Systems.
Under the terms of the asset purchase agreement, Wanxiang would acquire A123's automotive, grid and commercial business assets, including all technology, products, customer contracts and U.S. facilities in Michigan, Massachusetts and Missouri; its cathode powder manufacturing operations in China; and its equity interest in Shanghai Advanced Traction Battery Systems Co., A123's joint venture with Shanghai Automotive.
The final sale is subject to approval by the bankruptcy court with a scheduled hearing imminent. Sale to Wanxiang is also subject to review by the Committee for Foreign Investment in the United States (CFIUS) and requires approval by the U.S. government. Timing for such review and approvals is unknown at this time.
Chinese companies have launched $51.3 billion worth of outbound deals this year, making it Asia's second-biggest spender on overseas acquisitions behind Japan, according to Thomson Reuters data.
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