A123 Systems May Take $450M From Chinese Company Wanxiang Group

Posted Aug 9, 2012

A123 Systems, a Waltham, Massachusetts based battery company has signed an agreement with Wanxiang Group, a China-based automotive and energy company.  Wanxiang would invest as much as $450 million in A123 starting with $75 million in debt financing.  The agreement is “non-binding” and could still fall through though.

A123 would need the investment to sail through their financial problems.  Essentially it would give Wanxiang a potential buyout on some great terms.  A123 CEO said that the investment is ?the first step toward solidifying a strategic agreement that we believe would remove the uncertainty regarding A123?s financial situation.?

A123 has publicly said that they have about 4-5 months of cash left in the bank.  A123 posted a net loss of $125 million and $82.9 million in the first and second quarters, respectively.  Their stock price is trading at below $1 too.  The market cap of the company is $90.20 million.

A123 has gone through a major product recall and layoffs.  They are also seeing a slowdown from Fisker Automotive.

The bad part of this potential funding is that A123 is now being scrutinized of the government’s funding of clean-energy technology.  A123 had received a $249.1 million federal grant.  Wanxiang would get an 80% stake in A123 with the $450 million investment.

Florida Republican Representative Cliff Stearns heavily opposes the investment.

?It appears the Department of Energy and the Obama administration have failed to secure sensitive taxpayer funded intellectual property from being transferred to a foreign adversary,? said Stearns in an e-mailed statement.

A123 has a factory in Michigan and supplies batteries for General Motors’ Spark electric car and the BMW 5 Series hybrid sedan.

White House spokeswoman Amy Brundage said that the funds A123 received from the Energy Department can only be used for its U.S. operations.