Sims Ltd. to sell UK metals business

Sims Ltd., headquartered in Australia, has entered into a binding agreement to sell its U.K. Metal business (UKM) to London-based Unimetals Group Ltd. for total after-tax cash proceeds of approximately 195 million pounds sterling (AU$385 million, or $250 million), including the value of retained working capital, and subject to a completion mechanism linked to net asset value.

The transaction includes 28 facilities, including three port facilities, and four shredders.

Sims says the Unimetals transaction concludes the strategic review it announced in November 2023 that was designed “to explore various options to enhance the performance of the UK Metal business and maximize shareholder returns.”

At that time, Sims said the business unit has strategic value and plays a key role in supplying critical high-quality scrap to meet the growing domestic and export demand for low-carbon steel, copper and aluminum production.

Completion of the announced sale is subject to customary completion conditions, including obtaining regulatory approvals, with the transaction expected to be finalized before the end of the first quarter of its 2025 fiscal year, which ends Sept. 30. Sims says the transaction represents a significant premium to the net carrying value of the asset.

Unimetals will assume responsibility for employees currently working in the UKM business. Sales volumes for the UKM business represented approximately 14 percent of the total Sims Metal sales volumes in its 2024 fiscal year, according to the news release and ASX filing on the transaction.

Going forward, Sims Metal’s portfolio will include Australia and New Zealand Metal, North America Metal (NAM) and its 50 percent interest in the SA Recycling joint venture in the U.S.

In a LinkedIn post from Sims announcing the transaction, the company shares a quotation from Unimetals co-founders Jamie Afnaim and Alec Sellem that reads: “We are delighted to have agreed to the acquisition and are looking forward to integrating Sims Metal UK into the Unimetals’ family. This acquisition is a testament to our conviction in UK industry and our commitment to securing critical and other strategic raw materials from recycled sources.”

“We conducted a comprehensive strategic review of UKM, evaluating all options, including a sale, forming a joint venture or restructuring the business," Sims CEO and Managing Director Stephen Mikkelsen says of the transaction. "The board concluded that a sale provided the optimal outcome for Sims and its shareholders.

“By focusing on high-potential markets such as the United States, Australia and New Zealand, where our business position and demand for scrap are stronger, we can effectively leverage our strengths and drive sustainable growth."

The company has launched operational and commercial improvement programs in its NAM business designed to improve efficiencies and margin.

“These efforts are already yielding positive results," Mikkelson says.

Sims also is focused on growing its Sims Lifecycle Services business, which provides global information technology asset disposal (ITAD) services and electronics recycling to enterprises and data centers, with operations in the United Kingdom, continental Europe, North America, the Asia-Pacific region and Africa.

In related news, Sims has signed a letter of intent to sell its remaining interest in CLP Circular Services Holdings LLC for approximately $32 million (circa A$50 million).

Sims Municipal Recycling of New York (a predecessor to Circular Services) originally was valued on Sims’ balance sheet at AU$70 million, or $ 46.3 million, with the sale resulting in a loss for the company of $48 million in its 2024 fiscal year. However, in a series of three divestments that started in January 2022 and concludes with this transaction, Sims will have sold its entire interest for approximately AU$126 million ($83.3 million), an overall gain of AU$56 million ($37 million).

Completion is subject to customary due diligence, which is expected to conclude during the first quarter of its 2025 fiscal year.

“We believe that divesting UKM and Circular Services unlocks significant value for shareholders, which is not reflected in the current share price," Mikkelson says. "Between the two sales announced today, we will realize after-tax cash proceeds of approximately A$435 million ($287.4 million), which will be received in the first half of FY25. The proceeds will initially be used to strengthen our balance sheet and, over the medium term, we will look to balance the requirement of balance sheet strength and flexibility, with growing the refocused business and returns to shareholders.”