China's largest automotive parts supplier is poised to take control of U.S. battery maker A123 Systems AONE.O, which received $249 million green-technology grant from the Obama administration in 2009.
China's Wanxiang Group Corp plans to invest up to $450 million in A123 Systems, taking an 80 percent stake in the U.S. company, A123 said on Wednesday.
A123 also reported a second-quarter loss of $82.9 million, or 56 cents per share, compared with a loss of $55.4 million, or 44 cents per share, a year earlier.
The Wanxiang investment will include a bridge loan and the purchase of A123 senior secured convertible notes and warrants.
The companies have signed a non-binding memorandum of understanding and expect to conclude an agreement "in the near term," A123 said.
A123 warned last month that it had cash to fund its operations for only the next four to five months.
A123 received more than $200 million from venture investors before raising $378 million in a 2009 initial public offering. That same year, it was awarded a grant under the Obama administration's $2.4 billion Electric Drive Battery and Component Manufacturing Initiative.
Wanxiang, one of the largest non-government-owned companies in China, with annual revenue of more than $13 billion, has an electric vehicles subsidiary in Hangzhou and a U.S. subsidiary based outside Chicago. The parent company supplies auto parts to many of China's largest automakers.
A123 has battery contracts with BMW (BMWG.DE) and U.S. startup Fisker Automotive, and is slated to provide batteries for General Motors' (GM.N) upcoming Chevrolet Spark EV.
The memorandum of understanding calls for Wanxiang to provide an initial loan of $25 million, plus another $50 million on closing. Wanxiang also will purchase $200 million in senior secured convertible notes and invest as much as $175 million through the exercise of warrants it would receive in connection with the bridge loan and convertible notes.
In a second-quarter earnings conference call, A123 CEO David Vieau said the pact with Wanxiang "is the first step toward solidifying a strategic agreement that we believe would not only provide financial stability to A123 as we continue to grow, but it would also align us with a large, successful global brand in the automotive and cleantech industries ... We expect that a strategic agreement with Wanxiang would help enhance our competitive position in the global marketplace, especially in China."
Wanxiang CEO Weiding Lu said a long-term agreement would enable it to "build on the foundation A123 has established in the U.S. and help expand the company's capabilities both domestically and internationally."
A123 said second-quarter revenue fell 53 percent to $17 million.
It ended the quarter with $47.7 million in cash and equivalents, down from $113.1 million at the end of the first quarter.
(Reporting by A. Ananthalakshmi in Bangalore and Paul Lienert in Detroit; Editing by Roshni Menon and John Wallace)