Hugo Neu to merge with Sims Group of Australia
The merger of global recycling giant Sims Group with the metal recycling divisions of American company Hugo Neu Corporation remains subject to shareholder approval and the successful separation of the Hugo Neu Corporation from an existing arrangement with Schnitzer Steel Industries Inc. of Portland.
The resulting behemoth will form the world's largest metal recycling company, according to a joint statement issued June 24. It will be the largest U.S. exporter of
scrap steel and one of Americas biggest recyclers. It will also see Sims involved in a 20-year recycling contract to run New York City's metal, glass and plastics recycling curbside service.
"On behalf of the Sims Group Directors, I hope the proposed merger will receive shareholder support and we look forward to welcoming John Neu and his nominee to the new Sims Group Board, as well as the Hugo Neu management team and employees to the Group," Paul Mazoudier, chairman of Sims Group said.
The company formed from the merger will be known as the Sims Hugo Neu Company, or Sims Newco, with family-owned Hugo Neu becoming the largest shareholder with a share of 26 percent of the company. Existing Sims Group shareholders will hold 74 percent of the new company.
"This merger will transform the company, "Mazoudier said. It builds on Sims Group's proven track record of successful international expansion. It will position Sims Group as the global leader of the metal recycling industry, with a sound platform to adopt a broader approach to environmentally sound post consumer recycling.
Privately held, New York-based Hugo Neu operates primarily as a
scrap metal recycler and is one of Americas largest steel recycling companies. Hugo Neu is one of the largest processors and is the largest exporter of ferrous metal in the United States, handling about 20 percent of U.S. exports of ferrous metal. The metal recycling divisions of Hugo Neu has been valued at $497 million.
Metals recyclers have reaped huge profits in recent years by supplying
scrap to steelmakers, leaving some players poised to make buys. The
steelmaking industry itself has undergone significant consolidation in recent years, making mergers among
scrap suppliers more likely. This latest merger is expected to be completed by September, after which Sims Newco will handle about two million cwt of metal each year, achieving about $3 billion worth of gross revenue of about $381 million.
In the United States, a division of Sims Newco will oversee post-consumer recycling activities, including a landmark 20-year recycling contract to collect New York City's metal, glass and plastic, a contract expected to be finalized by the end of this year. The new company will derive 60 percent of its revenue within
North America, 25 percent in
Australia and
New Zealand and 15 percent in the
UK and
Europe.
"On behalf of the Sims Group Directors, I hope the proposed merger will receive shareholder support and we look forward to welcoming John Neu and his nominee to the new Sims Group Board, as well as the Hugo Neu management team and employees to the Group," Mazoudier said.
Listed on the Australian Stock Exchange, Sims has recently diversified into recycling other materials, including tires. The joint statement said that the merger with Hugo Neu would "significantly strengthen" the expansion of Sims Group's non-metallic recycling platform.
More mergers are expected to follow in an otherwise fractured metals recycling industry. And Schnitzer, which has long been family-controlled, remains a candidate for a merger. Even before Friday's announcement, Schnitzer executives conceded they too were looking to buy other processors.
"We are very focused on some of the things that we see are potential acquisitions in the market right now," Schnitzer Chief Executive John Carter said during a conference call, June 9. "We're going to do the thing that we think is going to yield the highest return for our shareholders."
According to the separation agreement, Hugo Neu will get full ownership of its plum New York City and Los Angeles
scrap processing terminals arguably the two best
scrap businesses in the world.
Schnitzer, meanwhile, will get full ownership of recycling facilities in Massachusetts, Maine, New Hampshire and Rhode Island. As part of the deal, Hugo Neu also will give Schnitzer its high-margin
scrap business in Hawaii, half of its
scrap trading business in
Europe and
Russia, and $52 million in cash.
Schnitzer executives earlier this month said the separation would give it more direct access to markets in
South America and
Europe, and more flexibility to buy other
scrap facilities.