JCI Offers to Buy A123’s Auto Battery Business

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

A123's automotive customers include BMW, Fisker, General Motors and SAIC Motor.

JCI plans to buy A123's technology, two lithium-ion battery plants in Michigan, a cathode powder factory in China and the Waltham, Mass.-based company's stake in a Chinese battery venture with Shanghai Automotive Industry Corp.

A123 also makes lithium-ion batteries for grid energy storage and commercial and government use. The company says JCI will license back to it certain technologies needed by those operations.

JCI has offered to provide A123 with $73 million of debtor-in-possession financing to allow the battery maker to restructure those operations.

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 agreed in August to sell 80% of its equity to China's Wanxiang Group Corp. for as much as $465 million. But the company says that deal collapsed because of "unanticipated and significant" challenges. The Wanxiang sale had not obtained the needed approval of a committee representing nine federal agencies, which reviews deals with foreign companies that could affect national security. A123 has contracts to develop advanced batteries for the U.S. Army.

Several Republic Congressmen warned that the sale could allow sensitive proprietary technology partially funded by $133 million in federal grants to leak to the Chinese company.