Back in October, federally funded battery company A123 Systems filed for Chapter 11 bankruptcy. Initially, Johnson Controls Inc, a fellow American battery maker, planned to buy A123's assets.
However, China's Wanxiang America Corp. swooped in and outbid Johnson Controls. On Tuesday, U.S. Bankruptcy Judge Kevin Carey approved the sale, The Wall Street Journal reports. Several government agencies have expressed concern about A123's tax-payer-funded assets going to a foreign company.
Massachusetts-based A123 received $250 million in grants under the U.S. Energy Department's $90 billion green energy initiative. The demand for electric car batteries was too low, however, and the company was forced into bankruptcy. In general, in a Chapter 11 bankruptcy the debtor company restructures in order to cut costs and repay its creditors. That often involves closing branches and selling off assets.
While Johnson Controls, which also received federal funding, was originally expected to buy A123's assets, it soon became apparent that Wanxiang Group wasn't going to let the assets go without a fight. Johnson Controls bowed out this week after Wanxiang offered $256.6 million for the assets. That's more than twice Johnson Controls' initial offer.
While the deal has been approved by the bankruptcy court, it's still subject to review by the Committee on Foreign Investment in the United States (CFIUS). That could be a problem.
More than two dozen lawmakers, including senators Chuck Grassley and John Thune, have expressed concern about A123's military contracts and tax-payer funded patents going to a foreign company. On top of that, Michigan's congressional delegation has voiced concerns about whether A123's battery technology could be separated from current military projects.
Johnson Controls has said that it would still consider buying A123's assets if the CFIUS fails to approve the Wanxiang deal.
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