Sims Metal Management Ltd slips on acquisition update

Acquisition of Remaining 50% of Sims Pacific Metals: Sims Metal Management Ltd.’s (ASX: SGM) stock fell 1% on June 29, 2018 after the company, as per the key strategy of disciplined growth through complementary acquisitions in the core markets, has agreed to acquire Fletcher Building’s 50 per cent share of Sims Pacific Metals for the consideration of NZ$42 million, excluding working capital adjustments. This acquisition will enhance SIM’s ownership of Sims Pacific Metals to 100 per cent. This acquisition is expected to be complete on 29 June 2018. The acquisition will be fully funded in cash, and is expected to be immediately earnings per share accretive in FY19. Sims Pacific Metals is a strongly performing business as it is the leading metal recycling business in New Zealand, that operates nine facilities, including two metal shredders across the North and South Islands. The business handles approximately 350,000 tonnes of ferrous and non-ferrous metal recyclables per annum. Moreover, Sims Pacific Metals is a key part of the Australasian business. The company is successful in having partnership with Fletcher Building for over 25 years. With 100% ownership, the company will be able to reinforce their commitment to the suppliers and customers both in New Zealand and abroad. The acquisition will also provide an opportunity for further development of the current operations, along with delivering a platform for future growth in the South Pacific. On the other hand, Fletcher Building is selling its 50 per cent stake in the Sims Pacific Metals joint venture to SIM as per their strategy to divest non-core businesses. Meanwhile, SGM stock has risen 10.85% in three months as on June 28, 2018  and is trading at a reasonable P/E of 15.10x.


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