UPDATE 1-China approves Wanxiang plan to buy U.S. battery maker A123

Thu Nov 29, 2012 10:48pm EST

* Wanxiang gets Beijing backing to acquire U.S. battery maker

* A123 takeover hinges on U.S. government approval

SHANGHAI Nov 30 (Reuters) - China's government has approved a plan by Wanxiang Group Corp, a major Chinese auto parts maker, to acquire bankrupt U.S. battery maker A123 Systems Inc , although a deal still hinges on the outcome of an auction next month and U.S. government approval.

A123, a maker of lithium ion batteries for electric cars, filed for Chapter 11 bankruptcy protection in October with a plan to sell its battery business to Milwaukee-based Johnson Controls for $125 million.

The planned sale will depend on whether better bids are received at next month's auction. Wanxiang has said it intends to make a bid.

China's National Development and Reform Commission, whose approval is required for major overseas acquisitions by Chinese companies, said in a statement posted on its website on Friday that it had approved Wanxiang's plans for a bid.

Any deal for A123 must receive the blessing of the U.S. government, however, as the company has received a $249 million grant from the Energy Department.

Republican Senators John Thune and Chuck Grassley have raised concerns about Wanxiang's attempt to acquire A123's battery business, saying military and taxpayer-funded technology should not be allowed to fall into foreign hands.

The Energy Department has stressed that none of the government's grant would be allowed to fund facilities abroad.

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