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Sims to merge with American recycler

Sims Group is to merge with US recycler Hugo Neu to create the largest metal recycler in the world.

The formation of the new company, to be known as Sims Newco, is part of Sims' strategy to grow its core metal recycling division through acquisition.

Sims Group chief executive Jeremy Sutcliffe said: "The cornerstone of our corporate goal has been to continue expanding Sims Group's core metal recycling business internationally, provided strict acquisition criteria are met.

"These include the requirement that any new business holds the number one or two market position in relevant markets, provides domestic and export marketing flexibility, and offers a platform for future growth, while also enhancing shareholder value."

Hugo Neu is one of the largest processors and the largest exporter of recycled ferrous metals in the United States handling on average approximately 20% of the United States' recycled ferrous metal deep sea exports.

It has focused on developing facilities with deep-water access to international markets and operates 15 metal collection and processing facilities including export terminals in Los Angeles and New York.

The merger values Hugo Neu at approximately A$650 million (£277.73 million) with Sims Group shareholders taking a 74% collective shareholding in Sims Newco and Hugo Neu owning 26%, which makes it the largest shareholder.

However, the merger is still dependent on shareholder support and regulatory backing. If all goes to plan, a Scheme of Arrangement will be formed with a listing on the Australian stock exchange for Sims Newco, and the merger will be completed by September this year. It will then revert to the Sims Group name.

Sims Group has also announced that its full year earning for 2005 are expected to be slightly lower than its previous forecast of A$190 million. This is due to a significant decrease in ferrous metal prices in June, which led to a downward revaluation of unsold inventory, as well as lower domestic selling prices.

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