Sims Ltd (ASX:SGM) says it has completed the sale of its UK Metals business—a deal that resembles an old-fashioned layby, judging by the terms of the sale outlined on Friday.
Sims informed the ASX that the “after-tax cash proceeds are now estimated at around £182 million ($A349 million). That’s $A36 million less than the £195 million (circa A$385 million) mentioned in the August statement to the ASX.
(The Australian dollar has firmed slightly against sterling since August, and the value in sterling is also lower.)
Sims stated that since signing the deal in August, "initial cash proceeds of circa £40 million have been received from the conversion of working capital surplus to Unimetals’ specified requirements."
Sims added that the £182 million figure comprises "residual net asset value: £97 million and working capital transferred to Sims Limited at completion: £85 million."
"Retained working capital transferred to Sims, comprised mainly of pre-completion receivables, is expected to be largely collected within the next 30 days. In addition, Unimetals will assume lease liabilities of £25 million as part of the transaction."
"Of the residual asset value of £97 million, Unimetals will pay a minimum of £30 million by 31 December 2024, with an option to extend the financing of any remaining balance to 30 June 2025. A competitive interest charge applies to all outstanding amounts.” Sims noted that it "retains full security over the assets of UK Metal for all deferred payments."
This means the buyers will gain full and clear title once they have made the final payment—whenever that occurs, but by June 30 next year.
Sims reiterated the reason for the sale, aside from the weak performance of the UK operation: "This transaction is aligned with Sims' strategy to focus on high-potential markets such as the United States, Australia, and New Zealand, where stronger demand for scrap allows the company to maximize its strengths."
The company also made it clear that a buyback (as some investors and analysts have speculated) is not the leading priority.
"The proceeds will initially be used to strengthen the balance sheet. The Company intends to continue taking a balanced approach to driving business growth and returning cash to shareholders over the medium term,” Sims stated in Friday’s announcement.
That sounds very much like a post-2025 plan.
