Sims Metal Management Limited, the world's largest listed metal
and electronic recycling company (SimsMM), today announced that it
has made a significant minority investment in Chiho-Tiande Group
Limited (CTG) (HKG:976), a Hong Kong listed and fast growing metals
and electronics recycler with operations in the People's Republic
of China and Hong Kong.
With main processing facilities in Taizhou and Ningbo, CTG is
the largest mixed scrap metals importer in China and operates three
core businesses: a metal recycling business, foundry business and
wholesale scrap metal brokerage business. CTG has expanded into
domestic ferrous and non-ferrous scrap metal recycling in Shanghai
and recently announced further expansion plans to Yantai on the
Bohai Coast and Hong Kong with new metals and electronics recycling
facilities.
SimsMM has acquired 16 percent of the existing shares of CTG
from founder Chairman Ankong Fang and Delco Participation B.V.
(Delco), a Netherlands-based scrap metal company. Delco has granted
an option to SimsMM to acquire a further 2 percent of CTG. In
addition, subject to approval by CTG’s independent shareholders,
SimsMM will subscribe for a convertible bond and be issued
warrants. After all instruments are exercised or converted, SimsMM
expects to hold 20 percent of the fully diluted issued capital of
CTG. In order to support the continued growth plans of the company,
Chairman Fang and Delco will re-invest two-thirds of the proceeds
received from SimsMM into convertible bonds issued by CTG on the
same terms as SimsMM.
Daniel W. Dienst, Group Chief Executive Officer stated, “After
several years of earnest evaluation of opportunities to enter the
physical recycling arena on Mainland China and in Hong Kong, we
have identified CTG as among the most exciting and attractive
companies that will define and shape the nascent Chinese recycling
landscape. Through our investment and partnership, we are
validating not only CTG's extraordinary growth prospects under the
vision of Chairman Fang and his leadership team but, as
importantly, the shared cultures of our two companies manifested in
unwavering commitments to creation of long-term shareholder wealth,
the safety of our valued employees and the health of the
environment and communities in which we operate and locate. CTG, as
a long-standing trusted and honorable trading partner of SimsMM,
made this investment decision that much more compelling."
Ankong Fang, Chairman of CTG stated, “As the largest mixed metal
scrap importer and processor in China, we are always exploring
opportunities to grow, both within China and worldwide. SimsMM has
been one of our major suppliers for a number of years and, given
SimsMM’s global reach and customer network, advanced technologies
and solutions in the metals and electronics recycling industry, the
proposed strategic collaboration with SimsMM will add significant
value and expertise and complements our Group.”
Chairman Fang continued, “I believe that SimsMM, the industry
leader, becoming a significant minority shareholder shows a strong
recognition of our Group’s competitiveness and achievements. I look
forward to continuing to lead our company and the opportunity to
work with a world-class management team under the leadership of Mr
Daniel Dienst and particularly Mr Michael Lion, who will become a
member of our Board upon the successful completion of the
transaction.”
Michael Lion, Chairman Sims Metal Management Asia Limited, and
SimsMM’s nominee to the CTG Board, concluded by saying, “The
complementary expertise of SimsMM’s global trading reach, material
recovery technology and rigorous controls married to CTG’s
exceptional leadership and fast-growing presence in the China and
Hong Kong recycling space provides a transformational platform for
our partnership. As the domestically generated volumes of
recyclable non-ferrous and ferrous metals and electronics continues
to grow, SimsMM's and CTG's shared vision of building a leading
best practices position in China together is an extraordinary and
exciting opportunity. I am honored to be designated to serve.”
Transaction details
SimsMM, through its Hong Kong subsidiary, has entered into a
sale and purchase agreement (SPA) with HWH Holdings Limited, an
affiliate of Chairman Fang, and Delco with respect to 18 percent of
the existing share capital of CTG. Pursuant to the SPA, SimsMM has
completed the initial purchase of 167 million CTG ordinary shares
(representing 16 percent of the current issued share capital of
CTG) at HK$4.50 per share from Chairman Fang and Delco. In
addition, Delco has granted SimsMM an option (for nominal
consideration) to acquire up to an additional 21 million shares
(representing 2 percent of the current issued share capital of
CTG), exercisable between two and three years from the date of
completion of the SPA, at an exercise price of HK$6.00 per
option.
SimsMM will subscribe for a three-year warrant (for nominal
consideration) over 13 million new CTG shares at an exercise price
of HK$6.00 per warrant as well as a three-year HK$316 million
convertible bond, which has a 4 percent per annum coupon and is
convertible into 53 million CTG shares at a conversion price of
HK$6.00 per share. Both the warrant and convertible bond issues are
subject to CTG independent shareholder approval. Chairman Fang and
Delco have also agreed to subscribe for a convertible bond on
equivalent terms.
The upfront investment by SimsMM will be approximately US$137
million and should all options, warrants and convertible bonds be
exercised or converted, SimsMM expects to have a fully-diluted 20
percent shareholding in CTG. Provided SimsMM retains a 10 percent
shareholding in CTG, it will have the right to nominate one
director to the CTG Board of Directors.
Based on SimsMM initially accounting for the investment as a
financial asset (as opposed to the equity method of accounting),
the transaction is expected to be EPS neutral to SimsMM in the near
term.
Cautionary Statements Regarding Forward-Looking
Information
This release may contain forward-looking statements, including
statements about Sims Metal Management’s financial condition,
results of operations, earnings outlook and prospects.
Forward-looking statements are typically identified by words such
as “plan,” “believe,” “expect,” “anticipate,” “intend,” “outlook,”
“estimate,” “forecast,” “project” and other similar words and
expressions.
These forward-looking statements involve certain risks and
uncertainties. Our ability to predict results or the actual effects
of our plans and strategies is subject to inherent uncertainty.
Factors that may cause actual results or earnings to differ
materially from these forward-looking statements include those
discussed and identified in filings we make with the Australian
Securities Exchange and the United States Securities and Exchange
Commission (“SEC”), including the risk factors described in the
Company’s Annual Report on Form 20-F, which we filed with the SEC
on 14 October 2011.
Because these forward-looking statements are subject to
assumptions and uncertainties, actual results may differ materially
from those expressed or implied by these forward-looking
statements. You are cautioned not to place undue reliance on these
statements, which speak only as of the date of this release.
All subsequent written and oral forward-looking statements
concerning the matters addressed in this release and attributable
to us or any person acting on our behalf are expressly qualified in
their entirety by the cautionary statements contained or referred
to in this release. Except to the extent required by applicable law
or regulation, we undertake no obligation to update these
forward-looking statements to reflect events or circumstances after
the date of this release.
All references to currencies, unless otherwise stated, reflect
measures in Australian dollars.
About Sims Metal Management
Sims Metal Management is the world’s largest listed metal
recycler with approximately 260 facilities and 6,500 employees
globally. Sims’ core businesses are metal recycling and recycling
solutions. Sims Metal Management generated approximately 85 percent
of its revenue from operations in North America, the United
Kingdom, Continental Europe, New Zealand and Asia in Fiscal 2011.
The Company’s ordinary shares are listed on the Australian
Securities Exchange (ASX: SGM) and its ADRs are listed on the New
York Stock Exchange (NYSE: SMS). Please visit our website
(www.simsmm.com) for more information on the Company and recent
developments.
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