Failed Taxpayer-Backed Company Purchased by Chinese Firm
U.S. battery maker A123 Systems in 2009 was awarded a $249 million grant as part of President Barack Obama’s stimulus plan.
In October of this year, the company filed for bankruptcy. Now they’re being purchased for roughly $257 million by a subsidiary of Chinese firm Wanxiang Group.
“According to the terms of the agreement, Wanxiang will acquire A123′s automotive, grid and commercial business assets, including all technology, products, customer contracts and U.S. facilities in Michigan, Massachusetts and Missouri,” WBJournal.com reports.
“It would also acquire the company’s 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 report adds.
However, not all of A123 was snatched up by Wanxiang.
The lithium-ion battery maker’s Ann Arbor, Mich.-based government business (i.e. all military contracts) was purchased for approximately $2.25 million by the Illinois-based Navitas Systems.
“We think we have structured this transaction to address potential national security concerns expressed during the review of our previous investment agreement with Wanxiang announced in August, as well as to address concerns raised by the Department of Energy,” said Dave Vieau, chief executive of A123, according to the Financial Times.
But although Wanxiang beat out several competitors, including a joint bid by Johnson Controls of Milwaukee and Japan’s NEC, the deal still needs to be approved by the Delaware court where A123 first filed for bankruptcy.
This most likely won’t be a problem.
“The US group will formally submit the bid to the court for approval on Tuesday,” FT notes. “The sale will also require the approval of the US Committee on Foreign Investment.”
When A123 filed for bankruptcy back in October, the company explained that the move was necessary to “provide for an orderly sale” of its operations and “help maximize the value of its assets for its stakeholders.”
Unsurprisingly, the Chapter 11 filing was met with harsh criticism from long-time opponents of the president’s “green” energy agenda.
A123 represents “the latest cautionary tale against the administration using taxpayer dollars to sponsor pet projects and then running from responsibility when they’re not successful,” said Rep. Darrel Issa (R-Calif.), Republican chairman of the House Oversight and Government Reform Committee, in October.
The company has debt of more than $376 million, according to A123’s bankruptcy filings.
“A123 said because its total sale price would be less than the total amount owed to creditors, the company doesn’t ‘anticipate any recoveries for its current shareholders and believes its stock to have no value,’” WBJournal.com notes.
Final Thought: Energy Secretary Steven Chu in 2009 called A123 Systems “one of the success stories of a high-technology company that was funded with government funds,” and “the model of what we want to happen on a bigger scale [emphasis added].”
Just think about that for a moment.
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