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January 14, 2002
Volume 80, Number 2
CENEAR 80 2 p. 7
ISSN 0009-2347
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ChemConnect buys CheMatch; one major online chemical trading site left


ChemConnect is buying its rival CheMatch.com for an unspecified sum in an all-stock deal. With the recent demise of EnronOnline, ChemConnect will be the primary online chemical auction and spot-trading site. Together, ChemConnect and CheMatch handled about $4 billion in transactions, involving about 10 million metric tons of product, in 2001.

"By concentrating liquidity, negotiation tools, fulfillment services, and information in one place, we are making it much easier for buyers and sellers of chemicals and plastics to accelerate their adoption of e-commerce," says John K. Robinson, who will remain ChemConnect's CEO. ChemConnect boasts about 7,500 members and more than 35 leading chemical company investors, excepting DuPont, which had backed the smaller CheMatch.

Chemical companies are responding favorably to the idea of only one site, claims Michele B. Hincks, ChemConnect's vice president for marketing. "By combining, we're clearing up the playing field and making it easier for companies to decide where and how to do business," she says. "ChemConnect is the clear winner."

Although both firms say they could have continued to operate separately, increased site traffic or so-called liquidity, a broader customer base, and lower operating costs helped drive the decision to combine in the face of the weak economy. ChemConnect will move its headquarters from San Francisco to CheMatch's Houston base. ChemConnect employs about 120 people, with another 40 at CheMatch; however, the final headcount is to be cut down to 75 to 80.

As the two dot-coms grew, they created similar features--trading floors, exchanges, and auctions--and alliances with partners in financial services, logistics, and technology that will be sorted out in the integration process. Hincks says commodity trading and auction services will be consolidated. Unchanged will be ChemConnect's chemicals exchange and Envera chemical company transaction hub, which it acquired in June 2001, and CheMatch's futures trading in connection with the Chicago Mercantile Exchange.

ChemConnect and CheMatch have raised a combined $180 million from investors since they were founded in 1995 and 1997, respectively. Careful cash-flow management, cost savings, higher anticipated usage, and a subscription-based business model introduced late last year are expected to make ChemConnect profitable by year-end, Hincks says.

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