10 January 2002 10:09 [Source: ICIS news]
HOUSTON (CNI)--Chemicals online marketplace ChemConnect claimed a new level of dominance Thursday with a planned acquisition of chief rival CheMatch
The stock transaction deal will include relocation of ChemConnect headquarters to CheMatch's office in Houston and a combined staff reduction from 160 to around 80. The combined company will be called ChemConnect.
In an interview with CNI, ChemConnect chief executive John Robinson said CheMatch president Larry McAfee will leave the new company once integration is complete, most likely in April. Robinson will hold titles of president and chief executive but a nine-member management team is expected to include some CheMatch executives.
Robinson declined to estimate the value of the transaction in which CheMatch shareholders will receive equal shares of ChemConnect.
He said work already has begun on a redesigned Web site that will incorporate the best of both platforms and noted that the ChemConnect legal team foresees no antitrust obstacles, predicting conclusion of the deal by mid-February.
Robinson said ChemConnect is evaluating personnel at both companies to determine which staffers will receive invitations to remain with ChemConnect. He said CheMatch has about 45 employees in Houston compared with 115 at ChemConnect in San Francisco. He could not speculate on the interest of ChemConnect employees to relocate to Houston.
Because ChemConnect plans to close its San Francisco office, Robinson said: "Chances are good that most of the employees in Houston will remain and there probably won't be much change in the Houston head count."
Robinson said ChemConnect chose Houston as its new headquarters because it considers this city central to the US petrochemicals production area, giving most of the company's customers easiest access to company leaders.
Due to the similar nature of the two businesses, Robinson said the acquisition involves a great deal of overlap in personnel that must be reconciled. He said the company will remain active overseas and will determine the future of offices there as part of the integration process.
Combined, the two sites generated $4bn (Euro4.5bn) worth of transactions last year with ChemConnect's revenue tripling from 2000. He said he expects the new company to continue expanding at an even faster pace now that they won't be competing with each other.
ChemConnect still plans a public offering at a later date, but Robinson told CNI he can't speculate on how soon the company might attempt another initial public offering (IPO). The company scuttled IPO plans in 2000 due to market conditions and Robinson said he doesn't see enough correction on the horizon yet to justify a deadline.
In addition, he said ChemConnect does not want to attempt another IPO until it has posted real profits but he also emphasised the company's goal of achieving that milestone by the end of this year.
He said: "We still want to do it [an IPO] but first we must establish the company as a substantial operation with scale that is profitable."
Robinson described the acquisition as a significant event in the evolution of the online chemicals trading industry, noting: "It establishes ChemConnect as the clear winner and the premier service for buying and selling chemicals worldwide. It is a big step forward."
Although the acquisition will consolidate the two largest independent trading sites, Robinson said he still foresees some additional consolidation of smaller players as a possibility.
He said: "The chemicals online marketplace battlefield will certainly be cleared with this combination. I think there are still a number of smaller companies that will need to deal with this issue, but this is a major step in consolidation."
Robinson said: "By concentrating liquidity, negotiation tools, fulfilment services and news 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."
A written statement from ChemConnect included only one comment from CheMatch's McAfee: "Global buyers and sellers of chemicals and plastics will realise greatly increased value from this new one-stop e-commerce solution."
Launched in 1995, ChemConnect said that it handled more than 6m tonne of chemicals transactions last year. CheMatch, founded in 1997, was said to have moved more than 5m tonne of product through its trading site last year.
(CNI's parent company, Reed Elsevier, has an equity share in CheMatch.)
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