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Australia
[Australia]
Posted on : Nov 19, 2009


The world's biggest recycler of scrap metal, Sims Metal Management, plans to
sell US$475 million worth of shares through an exercise to help fund
acquisitions and repay debt. The bulk of the capital raising - US$400 million -
will result from a fully underwritten placement of stock at US$21 a share to
institutional investors, the Sydney company told the ASX yesterday.

Sims also will offer $75 million of equity to existing shareholders through a
share purchase plan. Initially the money will go to reducing borrowings,
enabling acquisitions and funding capital spending. Since buying US firm Metal
Management in March last year, Sims has spent US$185 million on acquisitions.


'Through the capital raising, the company will be in an enviable position to
strengthen its existing business and fund growth opportunities,’ says its chief
executive, Daniel Dienst. However, Mitsui Company, a key shareholder, will not
exercise an option it has to maintain its shareholding at its current level
because of ''timing and internal capital allocation considerations'', the Sims
statement said.

With the announcement came a halt to trading in Sims shares at $22.20 to allow
the capital-raising to proceed. An IG Markets research analyst, Ben Potter, said
the raising looked positive for Sims at first glance. ‘The fact that
underwriters are prepared to offer this at a small discount of 5.4 per cent
suggests confidence,’ Mr Potter said in a research note.

‘With an excellent management team, strong balance sheet and significant growth
potential, this could be the catalyst needed to entice fresh money back into the
stock, especially given recent sideways trade.’ Mr Dienst told shareholders at
the company's annual meeting in Sydney yesterday that the economic downturn
‘demonstrated the soundness of our conservative behaviour’.

‘The financial discipline and conservative business practices that we had in
place heading into the global financial crisis allowed us to fare far better
than most,’ he said. ‘We are well-positioned to participate in, and lead, the
metal market recovery.’

 
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