Australia-based metal recycler Sims Limited has agreed to acquire the assets of Houston-based Tri Coastal Trading for $66.5 million as part of a broader plan to consolidate its Houston operations, while simultaneously entering into an agreement to sell its nearby non-operating land asset Mayo Shell.
Sims Limited stated that the transaction is a key step toward consolidating its Houston ferrous scrap operations and reducing its operating cost base. The proceeds from the sale of the Mayo Shell property are expected to substantially fund the acquisition of Tri Coastal Trading’s assets.
Sims enhances accessibility to foreign markets
According to Sims Limited, Tri Coastal Trading ships more than 350,000 mt of processed obsolete scrap per year. A central element of the transaction involves the relocation and consolidation of Sims’ Houston ferrous operations to the Tri Coastal Trading site. As part of this consolidation, Sims will assume Tri Coastal Trading’s existing service agreement with Enstructure LLC, granting exclusive access to harbourside land and a secure deep-sea dock facility located in the Galena Park industrial area of Houston.
Sims Limited explained that consolidating operations at the Enstructure-operated facility is expected to deliver significant operating and administrative cost savings. The site will also enhance Sims’ logistics capabilities, enabling scrap sourcing and shipment via truck, rail, barge, and bulk vessels, serving both domestic and international markets. The Enstructure service agreement has 18 years remaining, with two optional five-year extensions, providing long-term operational visibility.
Potential increase in EBITDA
Following integration and the realization of synergies across the two businesses, Sims Limited estimates that total EBITDA, including its existing ferrous and nonferrous operations in Houston, will exceed $25 million, assuming current ferrous and nonferrous sale prices.
Commenting on the transaction, Stephen Mikkelsen, chief executive officer and managing director of Sims Limited, stated, “We have been looking for a solution to our Houston business for some time. It is a big market. Houston is the fourth largest city in the USA and Texas’s GDP is US$2.5 trillion, the second largest in the USA. It also operates heavy industries such as oil and energy that have high metal intensity. While we have made significant progress in turning our Houston business around over the last two years, its ultimate potential was always hampered by the lack of a deep-sea dock, which would have only been achievable with significant capital expenditure at our Mayo Shell site. TCT is an ideal solution to this problem. We free up all our Houston land for sale, avoid significant capital expenditure on the current facilities and significantly reduce our cost per tonne.”