* Court approval shifts focus to foreign investment panel
* Creditors accuse Johnson Controls of trying to kill deal
* Opposition to sale to Wanxiang continues to grow
By Tom Hals
WILMINGTON, Del., Dec 11 China's largest auto
parts maker got court approval on Tuesday for its controversial
purchase of A123 Systems Inc, a bankrupt maker of electric car
batteries, but the judge said he was troubled that a U.S. rival
might be working to kill the deal.
A123, which was partly funded with U.S. government money,
was sold at an auction on Saturday for $256.6 million to
Wanxiang Group of China, which outbid Johnson Controls Inc of
The auction result prompted outcry from U.S. politicians who
objected to A123's taxpayer-financed lithium-ion technology
ending up in the hands of an economic rival. Johnson Controls
has said it remains interested in A123 if Wanxiang fails to get
approval from the U.S. government, which is coming under
pressure to block the deal.
"I'm troubled by suggestions that someone who participated
in the auction may in fact already be working against it," said
Delaware Bankruptcy Judge Kevin Carey at the end of Tuesday's
Carey ordered into escrow a $5.5 million fee from the sale
that was earmarked for Johnson Control's in return for it being
the lead bidder to support the A123 auction. The money will be
released when the sale closes or after an investigation by A123
William Baldiga of Brown Rudnick, who represents the
official committee of unsecured creditors, had told Carey he had
a confidential letter that suggested Johnson Controls planned to
undermine Wanxiang if the Chinese company won the auction.
Johnson Controls attorney, Joshua Feltman of Wachtell,
Lipton, Rosen & Katz, said the company should not be punished
"because we sympathize with Michigan Congressional delegation."
A123 has several facilities in Michigan and its politicians
have been vocal in opposing the sale to Wanxiang.
A123 has never turned a profit and received a $249 million
grant from the U.S. Department of Energy to develop lithium-ion
A Department of Energy official said on Monday the grant,
which has about $120 million remaining, would not be transferred
Opposition to the deal will now shift to Committee on
Foreign Investment in the United States (CFIUS).
Pressure has been building on Treasury Secretary Timothy
Geithner, the head of the panel, to block the takeover.
Chinese firms have been pouring cash into overseas
investments, and with that money has come concerns around the
globe that firms with ties to Beijing may not play by
CFIUS recently rejected a bid to build wind farms in Oregon
by Ralls Corp, owned by two executives of China's Sany Group
, and has blocked multiple deals by Huawei
Technologies Co, a Chinese telecom equipment
China's state-owned oil company CNOOC Ltd received
approval on Monday for the country's biggest foreign takeover, a
$15.1 billion acquisition of Nexen Inc after intense
scrutiny. CNOOC withdrew its bid for California-based Unocal
Corp in 2005 in the face of political opposition.
Wanxiang has tried to blunt some of the political opposition
by excluding A123's defense contracts from its bid.
A123 filed for bankruptcy in October as demand for electric
vehicles did not live up to expectations and it was forced to
recall defective car batteries. Its customers include Fisker
Automotive, General Motors Co and BMW.
If the foreign investment committee does not approve the
sale in the coming weeks, Wanxiang could walk away, although it
would forfeit a $25 million deposit that would go toward
repaying A123's creditors.
If that were to happen, A123 could then go back on the
block. Johnson Controls and NEC Corp of Japan made a
final runner-up bid of about $251 million, according to Alex
Molinaroli, president of Johnson Controls Power Solutions.
The only other company that qualified for the auction,
Siemens AG of Germany, does not appear to have made a
bid, according to a transcript of the auction.
If the foreign investment committee has not approved the
sale by Jan. 15, the deal could still close by transferring A123
to a trust controlled by U.S. citizens, which would not need
Wanxiang's money would then be turned over to repay the
creditors of A123, which filed for bankruptcy with $376 million
The Chinese company is no stranger to investing in the
Wanxiang generates about $1 billion in revenue in the United
States by supplying parts to GM and Ford Motor Co and has
bought or invested in more than 20 U.S. companies, many of them
in bankruptcy, said a congressional report published in October.
The case is A123 Systems Inc, Delaware Bankruptcy Court, No.