A123 asset sale targeted by alternate stalking horse Wanxiang America

By Jim Witters

Wilmington, Del., Nov. 2 - A123 Systems, Inc.'s proposed bid procedures drew an objection from Wanxiang America Corp., which hopes to replace Johnson Controls, Inc. as the stalking horse bidder, according to documents filed Nov. 1 with the U.S. Bankruptcy Court for the District of Delaware.

Wanxiang filed the objection "as a protective measure" in case A123 ultimately decides to proceed with JCI as the stalking horse.

"Wanxiang America is concerned that certain provisions in the bid procedures order would unnecessarily constrain Wanxiang America's ability to participate in the sale process on an even footing, thereby chilling the bidding process to the detriment of the debtors' estates," the objection states.

As previously reported, JCI has offered to buy the automotive business assets, with a purchase price of $116 million.

Wanxiang says it wants to buy more of the company's assets and offer a higher price.

"Although the debtors have not yet engaged in negotiations with Wanxiang America over the details of that proposal, Wanxiang America is hopeful that such negotiations will commence as soon as possible and that significant progress will be made prior to the start of the hearing on approval of the bid procedures motion. Wanxiang America also hopes to engage in discussions over the terms of that proposal with the official committee of unsecured creditors as soon as the committee has been formed and has retained legal counsel," according to court documents.

A123 also has filed an emergency motion seeking to replace JCI's $15.5 million interim debtor-in-possession financing facility with a $50 million loan from Wanxiang.

Wanxiang objection

Specifically, Wanxiang objects to the timeline for the sale process, which Wanxiang says is "unreasonably short" and "appears to have been designed to exclude any potential bidders."

Under the proposed timeline, bids must be submitted by Nov. 16. Wanxiang said it wants the bid deadline moved to Dec. 17, with an auction and sale hearing completed on or before Dec. 21.

The company also objects to the proposed $3.75 million breakup fee, the $4 million expense reimbursement and the minimum initial overbid of $2.5 million because those amounts are higher than Wanxiang's proposed overall stalking horse protections.

Finally, Wanxiang objects to the asset purchase agreement, which affords JCI protections if the debtors fail to close the sale, but provides no such protection for A123 should JCI fail to close.

"Wanxiang America is concerned that such provisions of the stalking horse APA would give excessive leverage to JCI if it attempted to re-negotiate the terms of the stalking horse APA following the bid deadline, assuming that no topping bids are submitted," the objection states.

A hearing on the bid procedures and the DIP facility is scheduled for 2:30 p.m. ET on Nov. 5.

Wanxiang America is a manufacturer of automotive components based in the United States. Wanxiang America is a wholly owned subsidiary of Wanxiang Group Corp., a Chinese company with more than $13 billion in annual revenue and more than 45,000 employees worldwide.

A123 is a Waltham, Mass.-based company that designs, develops, manufactures and sells rechargeable lithium-ion batteries and battery systems. The company filed for bankruptcy on Oct. 16. Its Chapter 11 case number is 12-12859.

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