SIMS Group Ltd is set to become the world's biggest listed metal recycling company after signing a $1.85 billion deal to merge with Metal Management Inc.
Sims said the proposed merger was consistent with its strategy to grow its core metal recycling division internationally, while also developing an innovative recycling solutions division.
"It represents the next step in Sims goal of building the world's leading recycling company with a strong management team to deliver on global growth,'' Sims chairman Paul Mazoudier said.
The merger will be affected by Sims issuing Metal Management stockholders 2.05 Sims ADR's per each Metal Management share.
Each ADR represents one Sims ordinary share.
Sims Metal Management will remain domiciled in Australia and retain its ASX listing, in addition to the new New York Stock Exchange listing of its ADRs, or American Depositary Receipts.
The merger terms value Metal Managements common stock and equity value at US$57.734 and US$1.5 billion respectively.
Metal Management is one of the largest full service metal recyclers in the United States, with 53 recycling facilities located in 17 states.
It is publicly listed on the New York Stock Exchange.
Sims said the combined group will have a sound financial position from which to grow both in North America and globally.
"The directors believe that synergies of approximately US$35 million can be achieved during the full year 2009 financial year,'' he said.
The transaction is mildly accretive on an earnings per share basis basis (pre-synergies) for the financial year just ended.
All outstanding restricted shares in Metal Management will vest upon completion of the transaction.
The merger is subject to several conditions, including Metal Management's shareholder approval which is expected at a meeting in the first quarter of 2008, approval by Sims's shareholders at its upcoming annual general meeting to an increase in the cap on non-executive director fees to accommodate the Metal Management nominees and other regulatory consents.
Jeremy Sutcliffe, the current chief executive of Sims, will continue as an executive director reporting to the new board until at least October 2009, and will chair Sims metals recycling operations in Australasia and Europe as well as Sims Recycling Solutions globally.
Metal Management's current president, chairman and chief executive, Daniel Dienst, will become the Sims Metal Management's Group chief executive and will chair the combined North American metals recycling businesses.
He also will have overall responsibility for global marketing.