In a deal worth US$125m, Johnson Controls will buy acquire A123 Systems ‘ automotive business assets, including all of its automotive technology, products and customer contracts; its facilities in Livonia and Romulus, Michigan; its cathode powder manufacturing facilities in China, and A123’s equity interest in Shanghai Advanced Traction Battery Systems , a joint venture with Shanghai Automotive.

The asset purchase agreement also includes provisions through which Johnson Controls intends to licence back to A123 certain technology for its grid, commercial and government businesses.

Bankrupt A123, the recipient of large government grants to develop automotive battery technology, said in a statament it was in talks regarding strategic alternatives for its grid, commercial, government and other operations, and had received several indications of interest for these businesses.

To facilitate the transaction process, A123 and all of its US subsidiaries today filed voluntary petitions for reorganisation under Chapter 11 of the US Bankruptcy Code in the US Bankruptcy Court for the District of Delaware. The company’s subsidiaries located outside the US were not included in the filings. This action is expected to allow the company to provide for an orderly sale of the automotive business assets and all other assets and business units under Section 363 of the bankruptcy code and enable the company to maximise the value of its assets for its stakeholders in a controlled, court-supervised environment.

A123 said it had received a commitment from Johnson Controls for US$72.5m in “debtor in possession” financing to support the company’s continued operations during the sale process. The company has filed a number of customary motions seeking court authorisation to continue to support its business operations during the transaction process, including the continued payment of employee wages, salaries and health benefits without interruption.

“We believe the asset purchase agreement with Johnson Controls, coupled with a Chapter 11 filing, is in the best interests of A123 and its stakeholders at this time,” said CEO David Vieau.

“We determined not to move forward with the previously announced Wanxiang agreement as a result of unanticipated and significant challenges to its completion. Since disclosing the Wanxiang agreement, we have simultaneously been evaluating contingencies, and we are pleased that Johnson Controls recognises the inherent value of our automotive technology and automotive business assets.

“As we move through this transaction process, we expect to continue operating and working with customers and suppliers.”

“Our interest in A123 Systems is consistent with our long-term growth strategies and overall commitment to the development of the advanced battery industry,” said Johnson’s battery unit head Alex Molinaroli. “Requirements for more energy efficient vehicles continue to increase, which is driving automotive manufacturers to pursue new technologies across a broad spectrum of powertrains and associated energy storage solutions. We believe that A123’s automotive capabilities are a good complement to our existing portfolio and will further advance [our] position as a market leader in this industry.”