Wanxiang Proposes New Trust Structure to Secure A123 Civilian Unit Purchase
Chinese automotive supplier Wanxiang aims to acquire A123 Systems’ civilian battery business using an independent trust, seeking to address US national security concerns and close the deal by February 2013.
Wanxiang, the Chinese automotive parts group, has outlined a revised approach to acquire the civilian business of A123 Systems, aiming to address US government concerns over national security and foreign ownership. The company intends to use an independent trust as an intermediary buyer for the bulk of A123’s operations, before ultimately taking over the business itself.
A123 Systems, a Massachusetts-based battery manufacturer, filed for bankruptcy protection in 2012. Its assets were split into civilian and defence units to facilitate sale and regulatory approval. The defence business, which supplies advanced batteries for US military and satellite applications, was sold to Illinois-based Navitas Systems for $2.25 million, isolating sensitive operations from foreign control.
US scrutiny and Wanxiang’s workaround
The Committee on Foreign Investment in the United States (CFIUS) had raised concerns about Wanxiang’s initial bid for A123, citing the strategic importance of battery technology and the risk of sensitive technology transfer. By proposing a trust to first acquire the civilian assets, Wanxiang is attempting to satisfy CFIUS requirements and demonstrate that national security interests are protected. Only after this intermediary step would Wanxiang take ownership of the civilian business.
A123’s civilian unit includes automotive and grid energy storage battery operations, which represent the majority of its business. Wanxiang’s $257 million offer covers these assets, with the company stating it plans to invest further and develop the business after acquisition. The trust structure is designed to separate the transaction from direct foreign control during regulatory review, potentially easing approval.
Timeline and next steps
A123 stated on 18 January 2013 that it expected the Wanxiang deal to be finalised by 1 February 2013, with Wanxiang indicating it hoped to close within two weeks. If successful, the transaction would see a major US lithium-ion battery supplier pass into Chinese ownership, though with defence-related technology remaining under US control. The deal comes amid heightened scrutiny of Chinese acquisitions in the US, especially in sectors considered strategically sensitive.
- Wanxiang: Chinese automotive supplier seeking global expansion
- A123 Systems: US-based lithium-ion battery manufacturer in bankruptcy
- Navitas Systems: US company acquiring A123’s defence assets
Wanxiang’s move reflects a broader pattern of Chinese firms seeking to expand their technology and manufacturing footprint through overseas acquisitions, often in the face of regulatory challenges. The outcome of the A123 sale will be watched closely by other companies considering similar cross-border deals in the automotive and energy sectors.
