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Eric Ng

One of Hong Kong's flagship business-to-business Internet companies will announce today it is to be sold to a rival, in the latest sign of consolidation in Asia's online industry.

Asia2B, which helps companies build online trading exchanges, will be merged into Singapore-based Sesami.com, sources said yesterday.

The transaction could be the beginning of a consolidation trend in the sector, analysts said.

Many companies in the so-called business-to-consumer sector have already announced that they are restructuring or downsizing.

'Consolidation in this difficult environment is good news to both companies,' said Matei Mihalca, head of Internet research with Merrill Lynch Securities.

He believed the merged entity could weather better the difficult operating environment of the business-to-business market.

The growth of this market had been 'somewhat slower than the market had expected'.

Asia2B was launched in May last year to great fanfare, counting among its shareholders some of Hong Kong's blue-chip companies or their subsidiaries.

These included Wharf (Holdings), Sun Hung Kai Properties, Beijing Enterprises Holdings, Jardine Matheson, Swire Pacific and New World Development.

It is led by chief executive Fang Fang, who is a former vice-president of red chip Beijing Enterprises Holdings, and a Merrill Lynch corporate finance banker.

It was formed with US$40 million contributed by the six business groups as a joint venture with United States-based online trading platform solutions provider Commerce One.

The shareholders believed at that time the US$35 billion combined trading volume of the six groups would give Asia2B a solid transaction base.

It would have covered the aviation, computers, shipping and logistics industries.

The online exchanges it planned to set up would allow the groups to move their procurement and trading operations online.

Its formation came after a series of e-commerce alliances between Hong Kong blue chips and US technology firms. These included tie-ups between Cable & Wireless HKT (now Pacific Century CyberWorks) and Oracle, and Hutchison Whampoa and Internet Capital Group.

Competitor Sesami.com was set up in September 1999.

It is 89 per cent owned by Singapore Telecom (SingTel), 10 per cent by Overseas Union Bank and 1 per cent by Eastman Chemical.

Sesami.com has been in competition with Asia2B since the latter's establishment.

Like Asia2B, it also uses Commerce One's e-commerce solutions to help diverse businesses, from pharmaceutical to publishing firms, to implement e-commerce.

About the same time Mr Fang was appointed to take the helm of Asia2B in May last year, Sesami.com announced that it was expanding into the Hong Kong market.

Last month, Sesami.com said it had teamed up with local systems integrator ePro to provide online commerce and logistics solutions.

It has also set up an alliance with the Hong Kong Productivity Council to provide e-commerce solutions to Hong Kong's small and medium-sized firms.

Industry insiders said Asia2B was struggling to reap substantial revenues, even with a strong shareholder background.

The start-up was aiming to break even by 2002.

In the four months to December 31, it registered total revenue of about HK$10 million.

This was a figure Hutchison Whampoa-owned online stationery seller bigboxx.com said it had made in an average month since it was set up last April.

A source at one of Asia2B's shareholders said the company's large number of shareholders had affected their commitment to the fledgling firm.

'It will be a merger of two equals,' a source close to Asia2B said.

'We will complement them with our North Asia exposure, particularly China.'

The source said the deal was not likely to involve cash, and shareholders of the two companies would have equal shareholdings.

SingTel will emerge as the single largest shareholder after the deal and the merged entity will be named Sesami.com.



Sesami buys former business-to-business darling of Blue Chips