JCI Aims to Buy A123 Assets from Bankruptcy

Johnson Controls Inc. has agreed to pay $125 million to acquire the automotive battery business of A123 Systems Inc., which filed for bankruptcy protection on Tuesday.

Milwaukee, Wis.-based JCI will provide $73 million of debtor-in-possession financing to keep A123 afloat as it restructures its remaining operations, which supply lithium-ion batteries for grid energy storage and commercial and government use. The battery maker says it continues to explore strategic alternatives for those businesses.

Waltham, Mass.-based A123 sought Chapter 11 protection from its creditors after missing $147 million in bond payments on Monday. Its bankruptcy filing lists assets of $460 million and debt of $376 million.

The assets JCI plans to buy include A123's technology, two battery facilities in Michigan, a factory in China and a stake in a Chinese battery venture with Shanghai Automotive Industry Corp. A123 says JCI will license back to it certain technologies needed by its remaining operations.

A123's automotive customers include BMW, Fisker, General Motors and China's SAIC Motor. Analysts say JCI's Power Solutions unit could benefit from A123's stop-start technology.

The sale to JCI requires the approval of a federal bankruptcy judge, who is likely to require an auction to seek higher bids.

A123 had signed an agreement in August to sell 80% of its equity to China's Wanxiang Group Corp. for as much as $465 million. The batter maker's bankruptcy filing says that deal collapsed because of "unanticipated and significant" challenges to its completion.

The arrangement required the approval of the Committee on Foreign Investment in the U.S., a panel of representatives from nine federal agencies that reviews deals with foreign companies that could affect national security. A123 has contracts to develop advanced batteries for the U.S. military.

Several Republican Congressmen challenged the deal, charging it could allow sensitive proprietary technology partially funded by $138 million in federal loans to leak to the Chinese company.