Johnson Controls Appeal of A123’s Sale to Wangxiang is Confusing

by / Tuesday, 18 December 2012 / Published in Smartgrid-CI Blog

What are Johnson Controls’ motivations?

Johnson Controls decided to appeal Wangxiang purchase of battery manufacturer bankrupt A123 that took place last week.

This decision came after some voices expressed concerns about seeing technologies that they consider strategic fall into the hands of a foreign power. No doubt that national security is a serious matter and that sensitive technology should be protected even when it is not fully connected to security.

Is this the reasons why Johnson Controls is appealing last week’s court decision? In a statement published yesterday, the company explains that it “objects to delay in payment of break-up fee and expense reimbursement”.

Further in its press release, Johnson Controls is more specific: “As part of the sale order, the court ordered the escrow of the break-up fee and expense reimbursement due to the company under its stalking horse agreement with A123. Johnson Controls is appealing the sale order to obtain the breakup fee and expense reimbursement to which it is entitled under that agreement and which were previously approved by the bankruptcy court.” More detail about this escrow here.

Obviously, we are not even close to expressing any clear concerns about national security. Well, not exactly though since at the bottom of its press release Johnson Controls states that it “remains open to considering future opportunities to acquire relevant portions of A123’s assets, keeping this critically important technology in the United States, preserving jobs and furthering the purpose of the American Reinvestment and Recovery Act”.

A statement that comes after a clear reminder of its lobbying power “Johnson Controls maintains an active government relations function that involves regular interaction with policy makers and agencies on the full range of issues relevant to the company”.

Maybe it is just poor communication but it seems that Johnson Controls’ main concern is to get its money back and that the company is using all levers possible to achieve this goal.

What makes their concern about sensitive technology not so convincing is that Johnson Controls lost the bid because its offer was only $5M less than Wanxiang’s. Another element that makes the claim even less convincing is that A123’s government-based business, including all US military contracts, was acquired in a separate $2.25 million transaction by Navitas Systems. We may infer form this decision that the sensitive aspect of the deal has already been taken care of by the judge.

But maybe we do not know the whole story. So what sensitive technology remains from A123 Systems that would interest Johnson Controls so much?

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