NSANY Nissan Motor Company Ltd (PK)

The acquirer, GSR Capital of China, could face scrutiny from U.S. regulatory agency

By Sean McLain 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (August 9, 2017).

TOKYO -- Nissan Motor Co. has agreed to sell its battery business including its U.S. operations to a Chinese investment firm, setting the stage for a potential ruling by a U.S. regulator on the transfer of sensitive technologies.

The buyer, GSR Capital, agreed Tuesday to buy the majority of Nissan's electric car battery operations for an undisclosed sum. The deal, which the parties said they expected to close by the end of the year, includes Nissan's battery manufacturing operations in Smyrna, Tenn.; Sunderland, England, and Japan.

Nissan also agreed to hand over part of its battery research operations in Japan and battery subsidiary Automotive Energy Supply Corp., which it has operated as a joint venture with NEC Corp. of Japan but would be fully owned by GSR Capital under the deal.

Batteries are among the most sought-after areas of technology because leading car makers have said they plan to boost sharply the proportion of their sales coming from electric-powered cars. South Korea and Japan have some of the battery industry's leading companies, with China in fast pursuit.

GSR Capital chairman Sonny Wu said in a statement that the deal "represents an important step for us in the new energy vehicle industry chain."

Nissan has been seeking to get out of the battery manufacturing business for some time. Chairman Carlos Ghosn has said the joint venture with NEC was set up a decade ago when Nissan had few options for getting electric-car batteries except making them itself. Today, there are a number of suppliers competing on price and technology, so it makes sense for Nissan to purchase from outside the company, he has said.

Those options include LG Chem Ltd., which supplies batteries to Nissan's alliance partner Renault SA. Mr. Ghosn told The Wall Street Journal in 2015 that he would consider using LG batteries in future electric vehicles.

In 2015, GSR Capital raised a $5 billion buyout fund. Its chairman, Mr. Wu, is also the co-founder of venture-capital firm GSR Ventures, which made its name investing in some of China's most famous tech startups, including ride-hailing company Didi Chuxing Technology Co.

One of GSR Venture's deals, for an automotive-lighting unit of Royal Philips NV, broke down over concerns from the Committee on Foreign Investment in the U.S., known as CFIUS -- an interagency group led by the Treasury Department that has the power to review foreign investments.

The battery deal with GSR Capital could face scrutiny from CFIUS, since it includes the transfer of a U.S. manufacturing facility.

In a text message, Mr. Wu said, "We will jointly file for CFIUS with Nissan." He said GSR Ventures has acquired stakes in two U.S.-based battery companies in the past.

Mr. Wu and a Nissan spokesman declined to comment on expectations for the regulatory process.

The deal comes amid U.S. lawmakers' calls for greater scrutiny of deals involving Chinese investors.

GSR Capital expects close scrutiny of the deal from CFIUS and is lining up a charm offensive in the U.S. to ensure approval, said a person with knowledge of the company's thinking.

The deal comes as Nissan prepares to introduce a new version of its Leaf electric car next month, which it says will have increased range and the ProPilot autonomous driving suite. Nissan is also developing a low-cost electric vehicle for China.

GSR Capital said that if the deal goes through, it plans to construct a battery facility in China.

Write to Sean McLain at sean.mclain@wsj.com

(END) Dow Jones Newswires

August 09, 2017 02:47 ET (06:47 GMT)

Copyright (c) 2017 Dow Jones & Company, Inc.