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T.E.Q.

MSA Buys Assets Of MetalSite & ScrapSite

Management Science Associates, Inc. (MSA) has signed a letter of intent to purchase the assets of MetalSite, Inc., the on-line e-business pioneer that brought Internet buying and selling to the Steel Industry. The announcement was made today by Dr. Alfred Kuehn, founder & chairman of MSA, and Richard Riederer, founder and chairman of MetalSite and the former CEO of Weirton Steel Corporation.

Metals Supply Alliances, LLC, an MSA subsidiary, will purchase the assets, including software and MetalSite & ScrapSite names. MSA Process Automation Solutions & Services, Inc (MSA PASS), an MSA spin-off, will integrate its real-time scheduling and process control systems with MetalSite & ScrapSite software to reduce operating costs and provide greater value to steel and scrap industry participants. MSA develops and hosts Internet client applications, so its resources will be valuable in supporting the new firm. Mr. Riederer has agreed to serve on the new firm�s Board of Directors.

Dr. Kuehn said, "We believe MetalSite�s assets are an excellent fit with MSA and MSA PASS. MSA played leading edge roles with technologies underlying e-commerce, e.g., electronic data interchange, Internet browsers, databases, data mining, on-line analytic processing, security and privacy practices to assure business continuity. MSA PASS has been developing real-time systems and solutions for the North American steel industry since 1982. We believe the Web has a good future in procurement and selling of steel, scrap metals, and other industrial and commercial products. Factors helping the new venture succeed in the steel industry will be MSA�s 1) record of providing a level playing field for clients within highly competitive industries, 2) success in developing supply chain systems used by several U.S. and foreign industries, and 3) domain knowledge and practical experience gained by working with most North American steel producers over many years."

Mr. Riederer stated, "In the last year, MetalSite handled over 2 million tons of product and conducted over 100,000 auctions, while also supporting other types of sales negotiation systems. MetalSite more than doubled its revenue and reached a new sales peak in the month before it closed, primarily from its long term users. After launching ScrapSite in May 2000, it transacted an additional 200 million pounds of sales among 50 firms, the most active scrap-metal market on the Web. Selling steel, scrap metals and other raw materials on the Internet provides opportunity for greater market access, reduced selling and administrative costs, less time to market, and inventory savings. But to prosper long-term, we will have to continue to identify and implement new ways to increase cost-effectiveness. Integrating the MetalSite and ScrapSite systems with MSA PASS software for scheduling and raw material selection optimization could greatly increase their overall value."

"MetalSite & ScrapSite technology and their exchange customers demonstrate our need to be the metals industry�s low cost producer and to provide neutral e-Marketplaces with equal access to all firms," said Dr. Kuehn. "MSA will do that, as it has in other industries. The barrier to MetalSite�s and ScrapSite�s growth in usage by non-equity firms during their final year is overcome by this purchase. The metals industry can participate and share in integrating enhanced exchange capabilities with MSA�s research and innovations to increase the competitiveness of the steel and scrap metals industries. MSA�s success in developing and operating supply chain services for all members of other industries tends to support the "Business-to-Business E-commerce" (Schwartz & Gremmels, Nov. 1999, p.19) conclusion, namely, "A viable exchange cannot be owned by an active participant," continued Dr. Kuehn.

"Weirton Steel saw the advantages of marketing and selling steel over the Internet when it began its online sales of its steel over an internally developed system in 1995," Mr. Riederer said. It attracted partners for selling prime and excess steel by 1998, so founded MetalSite. But Dr. Kuehn points out that all firms did not join in that effort, in part due to expectations of dot.com profits being available by developing competitive new systems. "The implosion of the dot.com world will now cause those firms and other industry non-participants to recognize that firms joining MSA�s exchange systems can lower their costs, increase profits by expanding their marketplace, and obtain flexible support to adapt the exchange system to meet their own internal needs," said Dr. Kuehn.

"Industry concern about the ownership of MetalSite and ScrapSite, and profits accruing to competitors from use or sale of these exchanges, can now be put to rest," said Dr. Kuehn. No firm participating in any MSA supply chain system for any industry ever quit using it due to bias, or lack of independence or flexibility. Mr. Reiderer added, "There was also no demonstrated reason to have concern about bias or neutrality in the MetalSite & ScrapSite exchanges, but competitive arguments to the contrary can never be proven false."

Mr. Riederer said, "We are delighted with this transaction. With the recent demise of several former competitors, this new enhanced B2B e-commerce solution on the metals industry will be welcomed by a broader group of firms. The new company should be able to provide improved, cost-effective means of generating sales for the entire industry. We feel MSA has the proper vision, and we are convinced that MSA's capabilities and success in other business areas will result in our e-commerce supply chain philosophies, concepts and related services emerging stronger than ever for all steel producers and purchasers," Mr. Riederer continued.

With more than 800 employees and an average annual growth rate of 18 percent, MSA is one of Pittsburgh's fastest growing high-tech companies. It has more than 300 clients, including some of the largest U.S. and foreign corporations and institutions, and also maintains offices in New York City, Boston, Chicago, High Point, NC; Toronto, Canada; Cardiff, Wales, and Kuala Lumpur, Malaysia.

MSA PASS is a Pittsburgh-based process automation specialist in turnkey computer and process control, facility-wide management systems for process and manufacturing industries, and systems design. The company is well known for its work in automating steel mills and scrap optimization. For 20 years it has supplied steel and scrap firms with material management systems, integrating standard reporting systems with advanced optimization techniques to lower purchase and receipt costs. MSA PASS also works in the chemical, pulp and paper and other process industries.