Giant Chemicals Companies Form E-Commerce Consortium to Challenge Start-Ups

Strategic Insights -

A dozen major chemical companies have joined forces to create a leading electronic commerce site, marking a significant move by established businesses to counter the rise of internet start-ups. The new trading consortium, which includes BP Amoco, Bayer, BASF, and other prominent players, aims to create a premier online marketplace for the global chemicals industry, estimated to be worth $400 billion. The venture will initially focus on contractual sales, which account for the majority of the worldwide chemical market, and will offer a range of services, including support for the supply chain. The consortium has selected Morgan Stanley Dean Witter as its financial adviser and plans to launch the new company in July, with operations expected to start by the end of the year.

Key Takeaways:

  • The consortium includes 12 major chemical companies, including BP Amoco, Bayer, BASF, and Dow, with a combined market value of $400 billion.
  • The new e-commerce site will focus on contractual sales, accounting for the majority of the worldwide chemical market.
  • The venture will offer a range of services, including support for the supply chain and an independent management and board.
  • The consortium has selected Morgan Stanley Dean Witter as its financial adviser, with initial capitalization exceeding $150 million.
  • The new site will challenge existing electronic exchanges, such as ChemConnect and CheMatch, which have received investments from some of the consortium members.
  • Analysts note that the consortium's success depends on strict enforcement of independent operations and effective management.

Statistics:

  • The global chemicals industry is estimated to be worth $400 billion.
  • The consortium will initially be capitalized at more than $150 million.
  • The new e-commerce site will focus on contractual sales, accounting for 80% of the worldwide chemical market.
  • ChemConnect, a leading start-up in the chemicals sector, has received investments from eight significant chemical companies, including BP, BASF, Bayer, and Dow.

Sources:

  • Bloomberg News
  • Reuters
  • AMR Research report on independent trading exchanges