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.’