UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No.  )

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TO THE STOCKHOLDERS OF METAL MANAGEMENT, INC.

 

A MERGER PROPOSAL — YOUR VOTE IS VERY IMPORTANT

 

To the Stockholders of Metal Management, Inc.:

 

You are cordially invited to attend a special meeting of stockholders of Metal Management, Inc., scheduled for March 14, 2008, at 10:00 a.m., local time. At the special meeting, you will be asked to adopt Metal Management’s merger agreement with Sims Group Limited, which is referred to as Sims, dated as of September 24, 2007. In the merger, a wholly owned subsidiary of Sims will be merged with and into Metal Management, with Metal Management surviving the merger and continuing its existence as a wholly owned subsidiary of Sims. The combined company created by the merger will be renamed Sims Metal Management Limited, subject to obtaining shareholders’ approval of the name change after the merger is completed.

 

If the merger is completed, then each share of Metal Management common stock that you own at the effective time of the merger will be converted into the right to receive 2.05 Sims American Depositary Shares, which are referred to as Sims ADSs. Each Sims ADS will represent one ordinary share of Sims. Sims ordinary shares will continue to be listed on the Australian Securities Exchange, and Sims ADSs will be listed on the New York Stock Exchange. It is estimated that immediately after the effective time of the merger, former Metal Management stockholders will hold Sims ADSs representing approximately 30% of the then outstanding Sims ordinary shares. Based upon the shares of Metal Management common stock outstanding on January 25, 2008, Sims will be obligated to issue approximately 53.2 million Sims ADSs in the merger. In addition, Sims may issue up to approximately 1.1 million Sims ADSs pursuant to the exercise of Metal Management options, which will be converted into Sims options upon completion of the merger.

 

The merger cannot be completed unless Metal Management stockholders adopt the merger agreement. The adoption requires the affirmative vote of the holders of a majority of the shares of Metal Management common stock outstanding on January 25, 2008, the record date for the special meeting.

 

The Metal Management board of directors has unanimously approved the merger agreement and the transactions contemplated by the merger agreement and determined the merger is in the best interests of Metal Management and its stockholders. The Metal Management board of directors unanimously recommends that Metal Management stockholders vote “FOR” adoption of the merger agreement.

 

The accompanying proxy statement/prospectus contains detailed information about the merger and the special meeting. This document is also a prospectus for the Sims ordinary shares underlying the Sims ADSs that will be issued in the merger. Metal Management’s stockholders are encouraged to read carefully this proxy statement/prospectus before voting, including the section entitled “Risk Factors” beginning on page 15.

 

Your vote is very important.  Whether or not you plan to attend the Metal Management special meeting, please take the time to vote by completing and mailing the enclosed proxy card or by granting your proxy electronically over the Internet or by telephone. If your shares are held in “street name,” you must instruct your broker in order to vote.

 

We are very excited about the opportunities the proposed merger brings to Metal Management’s stockholders, and I thank you for your consideration and continued support.

 

Sincerely,

 

Daniel W. Dienst

Chairman of the Board

Metal Management, Inc.

 

Neither the United States Securities and Exchange Commission nor any state securities commission has approved or disapproved of the merger described in this proxy statement/prospectus or the securities to be issued pursuant to the merger or determined that this proxy statement/prospectus is accurate or complete. Any representation to the contrary is a criminal offense.

 

This proxy statement/prospectus is dated February 12, 2008 and is being mailed to Metal Management stockholders on or about February 14, 2008.

 

 

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

TO BE HELD ON MARCH 14, 2008

 

To the Stockholders of Metal Management, Inc.:

 

A special meeting of Metal Management, Inc. stockholders will be held at 10:00 a.m., local time, on March 14, 2008, at the offices of King & Spalding LLP, 1185 Avenue of the Americas, 34th Floor, New York, New York, for the following purposes:

 

1. To consider and vote on the proposal to adopt the Agreement and Plan of Merger, dated as of September 24, 2007, by and among Sims Group Limited, MMI Acquisition Corporation and Metal Management, which is referred to as the merger agreement (a copy of which is attached as Appendix A to this proxy statement/prospectus).

 

2. To approve adjournments of the Metal Management special meeting, if necessary, to permit further solicitation of proxies if there are not sufficient votes at the time of the special meeting to approve the above proposal.

 

3. To consider and take action upon any other business that may properly come before the Metal Management special meeting or any reconvened meeting following an adjournment of the special meeting.

 

These items are described in the accompanying proxy statement/prospectus, which you should read carefully. Only Metal Management stockholders of record at the close of business on January 25, 2008, the record date for the Metal Management special meeting, are entitled to notice of, and to vote at, the Metal Management special meeting and any adjournments or postponements of the Metal Management special meeting. Under Delaware law, dissenters’ rights will not be available to Metal Management stockholders in connection with the merger.

 

Your vote is very important.  To ensure that your shares of Metal Management common stock are represented at the special meeting, please complete, date, sign and return the enclosed proxy/voting instruction card(s) and mail it/them promptly in the envelope provided, or vote your shares by telephone or over the Internet as described in the accompanying proxy statement/prospectus. Completing a proxy now will not prevent you from being able to vote at the special meeting by attending in person and casting a vote but will help to secure a quorum and avoid additional solicitation costs. However, if you do not return or submit the proxy or vote in person at the special meeting, the effect will be the same as a vote against the proposal to approve the merger agreement. You may revoke your proxy at any time before it is voted. Any executed but unmarked proxy/voting instruction card(s) will be voted “FOR” adoption of the merger agreement and as the Metal Management board of directors recommends on any other proposals properly brought before the special meeting.

 

By order of the Board of Directors of

Metal Management, Inc.

 

Chairman of the Board

February 12, 2008

 

TABLE OF CONTENTS

 

 

This proxy statement/prospectus incorporates by reference important business and financial information about Metal Management, Inc., which is referred to as Metal Management, from documents filed with the United States Securities and Exchange Commission, which is referred to as the SEC, that are not included in or delivered with this document. For a more detailed description of the documents incorporated by reference into this proxy statement/prospectus and how you may obtain them, see “Where You Can Find More Information” beginning on page 147.

 

Documents incorporated by reference are available to you without charge upon your written or oral request, excluding any exhibits to those documents, unless the exhibit is specifically incorporated by reference as an exhibit in this proxy statement/prospectus. You can obtain any of these documents from the SEC’s website at www.sec.gov or by requesting them in writing or by telephone at the following address:

 

Georgeson Inc.

17 State Street

New York, New York 10004

Telephone: (866) 288-2196

Facsimile: (212) 440-9009

 

Sims Group Limited, which is referred to as Sims, and Metal Management are not incorporating the contents of the websites of the SEC, Sims, Metal Management or any other person into this document. Metal Management is providing only the information about how you can obtain certain documents that are incorporated by reference into this proxy statement/prospectus at these websites for your convenience.

 

In order for you to receive timely delivery of the documents in advance of the Metal Management special meeting, Metal Management should receive your request no later than March 7, 2008.

 

This document, which forms part of a registration statement on Form F-4 filed with the SEC by Sims (File No. 333-147659), constitutes a prospectus of Sims under Section 5 of the United States Securities Act of 1933, as amended, which is referred to as the Securities Act, with respect to the Sims ordinary shares underlying the Sims American Depositary Shares, which are referred to as Sims ADSs, to be issued to Metal Management stockholders as required by the Agreement and Plan of Merger, dated as of September 24, 2007, by and among Sims, MMI Acquisition Corporation and Metal Management, which, together with the plan of merger contained therein, is referred to as the merger agreement. This document also constitutes a notice of meeting and a proxy statement under Section 14(a) of the United States Securities Exchange Act of 1934, as amended, which is referred to as the Exchange Act, with respect to the special meeting of Metal Management stockholders, at which Metal Management stockholders will be asked to consider and vote upon a proposal to adopt the merger agreement.

 

In this proxy statement/prospectus, unless otherwise specified or the context otherwise requires:

 

 

Except as otherwise indicated, all references to dates and times in this proxy statement/prospectus are based on United States Eastern time.

 

The following questions and answers briefly address some commonly asked questions about the Metal Management special meeting and the merger. They do not include all the information that may be important to you. Sims and Metal Management urge you to read carefully this entire proxy statement/prospectus, including the appendices and the other documents referenced in this proxy statement/prospectus. Page references are included in certain parts of these questions and answers to direct you to a more detailed description of topics presented elsewhere in this proxy statement/prospectus.

 

 

 

 

 

 

 

Georgeson Inc.
17 State Street
New York, New York 10004
Telephone: (866) 288-2196
Facsimile: (212) 440-9009

 

 

 

SUMMARY

 

The Companies

 

The Merger

	•	the designation of certain directors and officers as Sims Metal Management directors or executive officers;

	•	the accelerated vesting of options to purchase an aggregate of 120,000 shares of Metal Management common stock held by the Metal Management independent directors upon completion of the merger;

	•	the accelerated vesting of 554,699 shares of Metal Management restricted stock held by Metal Management executive officers upon completion of the merger; and

	•	the granting of bonuses by Metal Management to certain executive officers (other than its chief executive officer) in an aggregate amount of up to $1.5 million prior to completion of the merger.

	•	Norman R. Bobins, John T. DiLacqua, Robert Lewon and Gerald E. Morris, who are currently non-executive directors of Metal Management;
	•	Paul K. Mazoudier, J. Michael Feeney and Paul J. Varello, who are currently non-executive directors of Sims;
	•	Masakatsu Iwanaga and Christopher J. Renwick, who are currently non-executive directors of Sims designated by Mitsui & Co., Ltd. of Japan, a subsidiary of which is the largest shareholder of Sims;
	•	Jeremy L. Sutcliffe, who is currently chief executive officer of Sims, and Ross B. Cunningham, who is currently executive director group finance and strategy of Sims; and
	•	Daniel W. Dienst, who is currently president and chief executive officer of Metal Management.

	•	the Metal Management stockholders must adopt the merger agreement;
	•	the waiting period (and any extension thereof) applicable to the merger pursuant to the Hart-Scott Rodino Antitrust Improvements Act of 1976, as amended, which is referred to as the HSR Act, or any other applicable competition, merger, antitrust, foreign investment or similar law must have expired or been terminated;
	•	the registration statement, of which this proxy statement/prospectus is a part, must have been declared effective by the SEC, must not be the subject of any stop order or proceeding seeking a stop order, and Sims must receive all state securities law authorizations necessary to issue the Sims ADSs pursuant to the merger;
	•	the Sims ADSs issuable to Metal Management stockholders must have been approved for listing, subject to official notice of issuance, on the NYSE;
	•	all other governmental commission, board or other regulatory consents, authorizations, orders, approvals or filings that are necessary to complete the merger must have been obtained and be in full force and effect, subject to exceptions that would not have a material adverse effect on Metal Management or Sims;
	•	there must not be any judgment, decree, order or injunction of a court of competent jurisdiction that prohibits or makes illegal the transactions contemplated by the merger agreement;
	•	Metal Management must have received an opinion of its tax counsel to the effect that the merger will be treated for United States federal income tax purposes as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended, which is referred to as the Code, and that Sims, Metal Management and MMI Acquisition Corporation will qualify as parties to a reorganization within the meaning of Section 368(b) of the Code;
	•	the respective representations and warranties of Metal Management and Sims in the merger agreement must be true and correct, subject to exceptions that would not have a material adverse effect on Metal Management or Sims, as the case might be, or on Sims Metal Management following completion of the merger; and
	•	each of Metal Management and Sims must have performed in all material respects all of its respective obligations under the merger agreement.

	•	the paying party terminates the merger agreement to enter into a superior acquisition proposal; or
	•	the paying party knowingly breached the representations and warranties in the merger agreement at the date of the merger agreement.

	•	Sims terminates the merger agreement because the Metal Management board of directors has withdrawn or modified in an adverse manner its recommendation of the merger; or
	•	either party terminates the merger agreement because Metal Management’s stockholders failed to approve the merger, if (i) prior to the Metal Management special stockholders meeting, an acquisition proposal was publicly announced or communicated to the Metal Management board of directors and (ii) Metal Management enters into any business combination transaction, or an agreement providing for such transaction, with any third party within 12 months following such termination.

		Sims Ordinary Shares								Metal Management Common Stock
		High				Low				High				Low
2005
Quarter ended March 31, 2005		A$	19.08			A$	16.56			$	30.24			$	22.94
Quarter ended June 30, 2005		A$	17.22			A$	12.91			$	25.96			$	16.88
Quarter ended September 30, 2005		A$	19.45			A$	14.26			$	27.62			$	19.64
Quarter ended December 31, 2005		A$	19.22			A$	16.07			$	25.86			$	22.93
2006
Quarter ended March 31, 2006		A$	17.70			A$	14.44			$	32.25			$	23.48
Quarter ended June 30, 2006		A$	20.30			A$	17.67			$	34.91			$	27.93
Quarter ended September 30, 2006		A$	21.45			A$	18.00			$	31.87			$	24.12
Quarter ended December 31, 2006		A$	23.50			A$	19.60			$	38.75			$	27.39
2007
Quarter ended March 31, 2007		A$	24.45			A$	19.20			$	46.20			$	36.90
Quarter ended June 30, 2007		A$	27.73			A$	22.85			$	51.45			$	44.07
Quarter ended September 30, 2007		A$	33.30			A$	23.97			$	55.85			$	40.60
Quarter ended December 31, 2007		A$	31.15			A$	25.65			$	57.62			$	44.40
2008
Quarter ending March 31, 2008 (through February 7, 2008)		A$	29.90			A$	24.41			$	52.70			$	43.38

		Sims Dividends
Fiscal 2006
Half year period ended December 31, 2005
- Hugo Neu Corporation		A$	0.15
- all other shareholders		A$	0.45
Half year period ended June 30, 2006		A$	0.60
Fiscal 2007
Half year period ended December 31, 2006		A$	0.60
Half year period ended June 30, 2007		A$	0.60

		Metal Management
		Dividends
Fiscal 2006
Quarter ended June 30, 2005		$	0.075
Quarter ended September 30, 2005		$	0.075
Quarter ended December 31, 2005		$	0.075
Quarter ended March 31, 2006		$	0.075
Fiscal 2007
Quarter ended June 30, 2006		$	0.075
Quarter ended September 30, 2006		$	0.075
Quarter ended December 31, 2006		$	0.075
Quarter ended March 31, 2007		$	0.075
Fiscal 2008
Quarter ended June 30, 2007		$	0.075
Quarter ended September 30, 2007		$	0.075
Quarter ended December 31, 2007		$	0.075

	•	September 21, 2007, the last trading day prior to the public announcement of the proposed merger; and

	•	February 7, 2008, the last trading day for which this information could be calculated prior to the date of this proxy statement/prospectus.

		Sims Ordinary				Metal Management				Metal Management
		Shares (Price per				Common Stock				Equivalent Stock Price
		Share)(1)				(Price per Share)				(Price per Share)(2)
As of closing on September 21, 2007:
Price per share		$	28.16			$	48.86			$	57.72
As of closing on February 7, 2008:
Price per share		$	26.74			$	52.70			$	54.82

(1)		Sims ordinary share price as at the close of trading on September 21, 2007 and February 7, 2008 of A$32.55 and A$29.90, respectively, converted into U.S. dollars at the daily noon buying rates, as published by the Federal Reserve Bank of New York, on September 21, 2007 and February 7, 2008, respectively.

(2)		The Metal Management equivalent stock prices were calculated by multiplying the per share price of Sims ordinary shares on each date by the exchange ratio of 2.05.

		Six Months
		Ended
		September 30,								Years Ended March 31,
		2007				2006				2007				2006				2005				2004				2003
		(Unaudited)								(In thousands of U.S. dollars or shares, except for per share amounts)
Statement of Operations Data:
Net sales		$	1,369,208			$	1,080,620			$	2,229,012			$	1,589,126			$	1,701,958			$	1,083,413			$	770,009
Net income		$	40,502			$	73,962			$	116,405			$	60,264			$	92,250			$	51,389			$	20,501
Basic earnings per share		$	1.61			$	2.86			$	4.54			$	2.45			$	3.96			$	2.42			$	1.01
Weighted average shares outstanding			25,197				25,834				25,637				24,579				23,279				21,243				20,323
Diluted earnings per share		$	1.58			$	2.79			$	4.43			$	2.35			$	3.74			$	2.27			$	0.99
Weighted average diluted shares outstanding			25,603				26,489				26,251				25,670				24,659				22,653				20,741
Balance Sheet Data:
Total assets		$	755,011				N/A			$	695,523			$	555,317			$	478,782			$	406,416			$	248,651
Long-term debt (including current maturities)		$	31,829				N/A			$	206			$	3,248			$	2,531			$	44,297			$	89,610
Stockholders’ equity		$	506,919				N/A			$	464,830			$	383,889			$	312,616			$	202,839			$	78,282
Cash dividends paid per share		$	0.15			$	0.15			$	0.30			$	0.30			$	0.15			$	—			$	—

		Year Ended June 30,
		2007				2006				2005				2004				2003
		(In thousands of Australian dollars or shares, except for per share amounts)
Statement of Operations Data:
Net sales		A$	5,386,044			A$	3,612,313			A$	2,413,262			A$	1,751,101			A$	1,469,536
Net income		A$	249,874			A$	191,128			A$	189,082			A$	119,704			A$	74,735
Basic earnings per share		A$	2.00			A$	1.69			A$	2.08			A$	1.30			A$	0.82
Diluted earnings per share		A$	1.99			A$	1.69			A$	2.07			A$	1.30			A$	0.82
Weighted average shares outstanding			124,916				112,857				91,086				91,766				91,273
Weighted average diluted shares outstanding			125,620				113,193				91,180				91,854				91,319
Balance Sheet Data:
Total assets		A$	1,979,035			A$	1,801,379			A$	817,205			A$	712,327			A$	577,413
Total long-term debt		A$	339,538			A$	302,528			A$	98,946			A$	38,050			A$	8,292
Shareholders’ equity		A$	1,100,367			A$	1,031,726			A$	478,118			A$	457,940			A$	395,040
Cash dividends paid per ordinary share		A$	1.20			A$	1.35			A$	1.30			A$	0.57			A$	0.42

		Sims Group				Metal				Pro Forma				Pro Forma
		Limited				Management, Inc.				Adjustments				Combined
		Fiscal Year Ended				Period from July 1,				Fiscal Year				Fiscal Year
		June 30,				2006 to June 30,				Ended June 30,				Ended June 30,
		2007				2007(1)(2)				2007(1)(2)				2007(1)(2)
		(In thousands of Australian dollars, except for per share amounts)
Revenue		A$	5,386,044			A$	3,043,620			A$	—			A$	8,429,664
Operating expenses			(5,017,389	)			(2,854,862	)			(11,822	)			(7,884,073	)
Operating income			368,655				188,758				(11,822	)			545,591
Income from joint ventures			14,050				2,479				—				16,529
Interest expense			(29,963	)			(3,198	)			—				(33,161	)
Interest and other income, net			11,177				3,224				—				14,401
Income before income taxes			363,919				191,263				(11,822	)			543,360
Provision for income taxes			(114,045	)			(71,089	)			4,611				(180,523	)
Net income		A$	249,874			A$	120,174			A$	(7,211	)		A$	362,837
Basic earnings per share		A$	2.00											A$	2.02

						Pro Forma Combined
						Fiscal Year Ended
						June 30,
						2007(1)(2)
						(In thousands of
						Australian dollars, except
						for share and per share amounts)
Pro forma net income						A$	362,837
Weighted average number of ordinary shares used in calculating basic earnings per share(3):							179,596,802
Effect of dilution:
Options, including ordinary shares issued under the Sims Group Employee Share Scheme deemed to be options for accounting purposes							704,319
Adjusted weighted average number of ordinary shares used in calculating diluted earnings per share							180,301,121
Basic earnings per share						A$	2.02
Diluted earnings per share						A$	2.01

		Sims Group				Metal				Pro Forma				Pro Forma
		Limited				Management, Inc.				Adjustments				Combined
		June 30,				June 30,				June 30,				June 30,
		2007				2007(2)(4)				2007(2)				2007(2)
		(In thousands of Australian dollars)
ASSETS
Total current assets		A$	775,557			A$	608,205			A$	30,813			A$	1,414,575
Total non-current assets			1,203,478				337,932				1,318,701				2,860,111
Total assets			1,979,035				946,137				1,349,514				4,274,686
LIABILITIES
Total current liabilities			437,841				250,047				30,000				717,888
Total non-current liabilities			440,827				122,024				105,518				668,369
Total liabilities			878,668				372,071				135,518				1,386,257
SHAREHOLDERS’ EQUITY
Ordinary shares			728,378				241,162				1,546,900				2,516,440
Accumulated other comprehensive income			(68,297	)			(11,661	)			11,661				(68,297	)
Retained earnings			440,286				404,841				(404,841	)			440,286
Treasury stock, at cost			—				(60,276	)			60,276				—
Shareholders’ equity			1,100,367				574,066				1,213,996				2,888,429
Total liabilities and shareholders’ equity		A$	1,979,035			A$	946,137			A$	1,349,514			A$	4,274,686

(1)		The information is derived from the historical consolidated financial statements of Metal Management for its fiscal year ended March 31, 2007, adjusted for the following to derive comparable reporting periods with Sims:

	•	quarterly information for the period April 1, 2006 to June 30, 2006 is not included in the pro forma financial information for Metal Management; and
	•	quarterly information for the period April 1, 2007 to June 30, 2007 has been included in the pro forma financial information for Metal Management.

(2)		The information for Metal Management and the pro forma adjustments above were originally denominated in U.S. dollars and have been converted to Australian dollars based on the average exchange rate for the period from July 1, 2006 to June 30, 2007 of A$1.275 = $1.00 for the statement of operations and the noon buying rate as of June 29, 2007 of A$1.176 = $1.00 for the balance sheet.
(3)		The merger consideration consists of Sims ADSs representing Sims ordinary shares. The weighted average number of pro forma shares has been adjusted as if the Sims ADSs to be issued in connection with the merger had been issued on July 1, 2006.
(4)		The information is derived from the historical financial statements of Metal Management for its fiscal quarter ended June 30, 2007, which are unaudited.

 

Unaudited Comparative Per Share Information

		Year Ended June 30, 2007
										Sims				Metal Management
		Historical				Historical				Pro Forma				Pro Forma
		Sims(1)				Metal Management				Combined				Equivalent(2)
		(In thousands of U.S. dollars, except per share amounts)
Income from continuing operations		$	195,980			$	94,255			$	284,578
Per Common Share
Basic		$	1.57			$	3.75			$	1.58			$	3.24
Diluted		$	1.56			$	3.68			$	1.58			$	3.24
Dividends		$	0.94			$	0.30			$	0.70			$	1.44
Book value of equity		$	7.43			$	18.89			$	13.61			$	27.90

(1)		Sims’s results as reported in Australian dollars have been converted into U.S. dollars using an average exchange rate of A$1.275 = $1.00 and a year end rate of A$1.176 = $1.00.
(2)		The Metal Management pro forma equivalent per share amounts are calculated by multiplying the Sims pro forma combined amounts per share by the exchange ratio of 2.05.

 

Exchange Rate Information

 

RISK FACTORS

 

In addition to general investment risks and the other information contained in or incorporated by reference into this document, including the matters under the caption “Cautionary Statements Regarding Forward-Looking Information” and the matters discussed under the caption “Risk Factors” included in the Annual Report on Form 10-K filed by Metal Management for the 12-month period ended March 31, 2007, as updated by subsequently filed Forms 8-K and 10-Q, you should carefully consider the following factors in deciding whether to vote for adoption of the merger agreement.

 

Risks Relating to the Merger

 

Because the market price of Sims ordinary shares will fluctuate, Metal Management stockholders cannot be sure of the value of the consideration they will receive in the merger.

 

Upon completion of the merger, each share of Metal Management’s common stock will be converted into the right to receive 2.05 Sims ADSs. Each Sims ADS will represent one Sims ordinary share, and the value of the Sims ADSs is accordingly expected to fluctuate based, to a significant extent, on corresponding changes in the value of Sims ordinary shares. The value of Sims ordinary shares may vary significantly from the closing price of Sims ordinary shares on the date the merger was announced, the date that this document was mailed to Metal Management stockholders, the date of the special meeting of Metal Management stockholders and the last trading day preceding the closing date. There will be no adjustment to the exchange ratio for changes in the market price of Sims ordinary shares or Metal Management common stock. Neither company is permitted to terminate the merger agreement, and the Metal Management board of directors is not permitted to change its recommendation to its stockholders to approve the merger, solely because of changes in the market price of either company’s stock. The market value of Sims ADSs to be received in the merger will continue to fluctuate following completion of the merger. Stock price changes may result from a variety of factors, including general market and economic conditions, changes in Sims Metal Management’s businesses, operations and prospects, and regulatory considerations. Many of these factors will be beyond the control of Sims Metal Management and its management. Before deciding whether to vote for adoption of the merger agreement, you should obtain current market quotations for Sims ordinary shares and shares of Metal Management common stock.

 

The value of Sims ADSs to be received in the merger will be subject to currency fluctuations.

 

Prior to the completion of the merger, any change in the U.S. dollar — Australian dollar exchange rate will affect the U.S. dollar market value of the consideration that Metal Management stockholders will receive upon completion of the merger. There will be no adjustment to the exchange ratio for changes in the U.S. dollar — Australian dollar exchange rate. Neither company is permitted to terminate the merger agreement, and the Metal Management board of directors is not permitted to change its recommendation to its stockholders to approve the merger, solely because of changes in currency exchange rates. Following completion of the merger, fluctuations in the exchange rate between the U.S. dollar and the Australian dollar will continue to affect the U.S. dollar equivalent of the Australian dollar price of Sims ordinary shares listed on the ASX and the market price of Sims ADSs traded on the NYSE. Before deciding whether to vote for adoption of the merger agreement, you should obtain information regarding the U.S. dollar — Australian dollar exchange rate.

 

Stockholders in the United States may decide to sell Metal Management common stock or Sims ADSs, which could cause a decline in their respective market prices.

 

Some United States holders of Metal Management common stock may be disinclined to own shares of a company that is organized and has its primary listing outside of the United States. This could result in the sale of Metal Management shares prior to the completion of the merger or the sale of Sims ADSs received in the merger, some of which may be purchased by Australian and other non-U.S. investors. In addition, the market price of Metal Management common stock, Sims ordinary shares and Sims ADSs may be adversely affected by arbitrage activities occurring prior to the completion of the merger. These sales, or the prospects of such

sales in the future, could adversely affect the market price for, and the ability to sell in the market, shares of Metal Management common stock before the merger is completed and Sims ADSs after the merger is completed.

 

Sims ADSs may not be as liquid as Metal Management common stock.

 

Some companies that have issued ADSs on United States stock exchanges have experienced lower levels of liquidity in their ADSs than is the case for their ordinary shares listed on their domestic exchange. There is a possibility that Sims ADSs will be less liquid than Sims ordinary shares listed on the ASX or less liquid than Metal Management common stock. In addition, investors may incur higher transaction costs when buying and selling Sims ADSs than they would incur in buying and selling Metal Management common stock.

 

The rights of holders of Sims ADSs to be issued in the merger will not be the same as the rights of holders of Metal Management common stock or Sims ordinary shares.

 

Metal Management is a corporation organized under the laws of Delaware. The rights of holders of Metal Management common stock are governed by the Delaware General Corporation Law, the certificate of incorporation and bylaws of Metal Management and the listing rules of the NYSE. Sims is a company organized under the laws of Australia. Upon completion of the merger, the former holders of Metal Management common stock will receive Sims ADSs, which represent a beneficial ownership interest in Sims ordinary shares. The rights of holders of Sims ADSs will be governed by the Australian Corporations Act 2001 (Cth), which is referred to as the Corporations Act, Sims’s constitution, the listing rules of the ASX and the NYSE and the deposit agreement pursuant to which the ADSs will be issued. There are differences between the rights presently enjoyed by holders of Metal Management common stock and the rights to which the holders of Sims ADSs will be entitled following the merger. In some cases, the holders of Sims ADSs to be issued in the merger may not be entitled to important rights to which they would have been entitled as holders of Metal Management common stock. The rights and terms of the Sims ADSs are designed to replicate, to the extent reasonably practicable, the rights attendant to Sims ordinary shares, for which there is currently no active trading market in the United States. However, because of aspects of Australian law, Sims’s constitution and the terms of the deposit agreement under which the Sims ADSs will be issued, the rights of holders of Sims ADSs will not be identical to and, in some respects, may be less favorable than, the rights of holders of Sims ordinary shares. For more information regarding the characteristics of, and differences between, Metal Management common stock, Sims ordinary shares and Sims ADSs, please refer to “Description of Sims Ordinary Shares,” “Description of Sims American Depositary Shares,” and “Comparative Rights of Stockholders.”

 

After the completion of the merger, the market price of Sims ADSs may not be identical, in U.S. dollar terms, to the market price of Sims ordinary shares.

 

While the market price of Sims ADSs is expected to fluctuate according to the market price of Sims ordinary shares and according to changes in the U.S. dollar — Australian dollar exchange rate, there is no guarantee that this relationship will be observed at all times, or at any time. The market price of Sims ADSs may differ from the market price of Sims ordinary shares in U.S. dollar terms for a number of reasons, including the relative liquidity of Sims ADSs and Sims ordinary shares.

 

After the completion of the merger, the market price of Sims ordinary shares may be affected by different factors than those currently affecting Sims ordinary shares or Metal Management common stock.

 

The businesses of Sims and Metal Management differ in some respects and, accordingly, the results of operations of the combined company following the consummation of the merger and the market price of Sims ordinary shares and Sims ADSs following the transaction may be affected by factors different from those currently affecting the independent results of operations of each of Sims and Metal Management. In particular, Sims operates significant businesses outside of the United States and has a greater exposure to markets and economies outside the United States than Metal Management currently does. For a discussion of the businesses of Sims and Metal Management and of certain factors to consider in connection with those businesses, see

“The Companies — Sims,” “The Companies — Metal Management, Inc.” and the documents incorporated by reference in this document and referred to under “Where You Can Find More Information.”

 

Sims Metal Management will experience significant changes in the composition of its board of directors and senior management as a result of the merger, which could result in disruption in its business and delay or prevent the successful integration of the businesses of Sims and Metal Management.

 

Following completion of the merger, Sims Metal Management will experience significant changes in the composition of its board of directors and senior management. The board of directors of the combined company will be expanded to 12 members, with the current directors of Metal Management joining the Sims Metal Management board. In addition, Metal Management’s current chief executive officer and chief financial officer will become the chief executive officer and chief financial officer of Sims Metal Management following the merger. After the merger, the executive offices of Sims Metal Management will be relocated to New York, New York, while the group accounting consolidation and external financial reporting processes will be progressively relocated to the United States until approximately September 2008. The success of Sims Metal Management following the merger will depend, to a significant extent, on the performance of its new board of directors and senior management team. Following the merger, Sims Metal Management will be subject to risks associated with its post-transaction management structure, including risks relating to officer and employee integration, potential loss of the services of key officers or employees, managerial efficiency and effectiveness and familiarity with the combined business and operations. In addition, Sims Metal Management will be subject to risks associated with the division of management responsibilities between Mr. Dienst, who will become group chief executive officer and chair of the combined North American metal recycling business, and Mr. Sutcliffe, who will continue as an executive director and will chair Sims Metal Management’s metal recycling business in Australasia and Europe as well as Sims Recycling Solutions globally. While the respective roles of Mr. Dienst and Mr. Sutcliffe have been delineated, there is a risk that the management structure will not yield the intended benefits and may cause difficulties for the execution of group strategies.

 

Sims Metal Management will be a “foreign private issuer” under the rules and regulations of the SEC and, as a result, will be exempt from a number of rules under the Exchange Act and will be permitted to file less information with the SEC than a company incorporated in the United States.

 

Following completion of the merger, Sims Metal Management will continue to be incorporated in Australia and will be deemed to be a “foreign private issuer” under the rules and regulations of the SEC. As a foreign private issuer, Sims Metal Management will be exempt from certain rules under the Exchange Act that would otherwise apply if Sims Metal Management were a company incorporated in the United States, including:

 

 

In addition, Sims Metal Management’s officers, directors and principal shareholders will be exempt from the reporting and “short-swing” profit recovery provisions of Section 16 of the Exchange Act and the related rules with respect to their purchases and sales of Sims ordinary shares and Sims ADSs. Accordingly, after the completion of the merger, if you hold Sims ADSs, you may receive less information about the combined company than you currently receive about Metal Management and be afforded less protection under the United States federal securities laws than you are entitled to currently.

 

In addition, if Sims Metal Management loses its status as a foreign private issuer that is exempt from such SEC reporting obligations at some future time, then it will no longer be exempt from such rules and,

among other things, will be required to file periodic reports and financial statements as if it were a company incorporated in the United States. The costs incurred in fulfilling these additional regulatory requirements could be substantial.

 

As a foreign private issuer, Sims Metal Management will not be required to comply with most of the corporate governance standards of the NYSE applicable to companies incorporated in the United States.

 

Following completion of the merger, the Sims Metal Management board of directors will be required to maintain an audit committee comprised solely of three or more directors satisfying the independence standards of the NYSE applicable to audit committee members. As a foreign private issuer, however, Sims Metal Management will not be required to comply with most of the other corporate governance rules of the NYSE, including the requirement to maintain a majority of independent directors, and nominating and compensation committees of its board of directors comprised solely of independent directors. Holders of Sims ADSs may therefore not be afforded the benefits of the corporate governance standards of the NYSE applicable to companies incorporated in the United States.

 

Following the completion of the merger, Sims Metal Management will continue to prepare its financial statements using Australian dollars as its reporting currency.

 

Sims Metal Management will continue to use the Australian dollar as its financial statement reporting currency following completion of the merger. Sims Metal Management’s financial results reported in Australian dollars may differ materially from its results if reported in U.S. dollars due to changes in the exchange rates of the Australian dollar, the U.S. dollar and the currencies of other countries in which Sims Metal Management does business. Future changes in currency exchange rates could have a material adverse effect on Sims Metal Management’s financial results.

 

Sims’s largest shareholder will have significant influence after the merger over transactions requiring shareholder approval.

 

Mitsui Raw Materials Development Pty Limited currently holds approximately 19.9% of the outstanding ordinary shares of Sims and is Sims’s largest shareholder. Under Sims’s constitution, Mitsui & Co., Ltd and any of its related bodies corporate, which are collectively referred to as Mitsui, have the right to designate a representative director to serve on the Sims board of directors so long as Mitsui holds 5% or more of Sims ordinary shares and, so long as Mitsui holds 15% or more of Sims ordinary shares, then Mitsui has the right to designate both a representative director and an independent director to serve on the Sims board of directors. Under Sims’s constitution, Mitsui also has a 12-month period in which to reestablish a 15% or greater shareholding in Sims and retain its additional board designation right if its interest is diluted under certain circumstances. These rights of Mitsui will continue to be binding on Sims Metal Management following the merger. Immediately after the merger, Mitsui is expected to hold approximately 14% of the ordinary shares of Sims Metal Management and will therefore have the right to designate a representative director to serve on the Sims board of directors. Under an agreement with Sims, Mitsui is entitled to retain its right to designate an additional independent director if it reestablishes a 15% or greater shareholding in Sims Metal Management within 12 months after the date of completion of the merger. Mitsui may therefore decide to increase its shareholding in Sims Metal Management in order to maintain its additional board designation right. As a result, after the completion of the merger, Mitsui may increase its shareholding in Sims Metal Management, which would give Mitsui significant influence over transactions requiring approval of Sims Metal Management’s shareholders. Mitsui may have interests with respect to its investment in Sims Metal Management that are different from, or in addition to, the interests of other holders of Sims ordinary shares or Sims ADSs. The extent of Mitsui’s shareholding in Sims Metal Management could also have the effect of discouraging offers to acquire control of Sims Metal Management and may preclude holders of Sims ordinary shares or Sims ADSs from receiving any premium above the market price for their shares that may be offered in connection with any attempt to acquire control of Sims Metal Management.

The merger agreement limits Metal Management’s ability to pursue alternatives to the merger.

 

The merger agreement contains non-solicitation provisions that, subject to limited exceptions, restrict Metal Management’s ability to discuss, facilitate or commit to competing third-party proposals to acquire all or a significant part of Metal Management. Further, there are only limited exceptions to Metal Management’s agreement that the Metal Management board of directors will not withdraw or modify in a way adverse to Sims its recommendation to Metal Management’s stockholders that they vote in favor of the merger, or recommend any other acquisition proposal. Although the Metal Management board of directors is permitted to take these actions in connection with receipt of an unsolicited superior acquisition proposal from another party if it determines that the failure to do so would be reasonably likely to result in a breach of its fiduciary duties, doing so under certain circumstances would entitle Sims to terminate the merger agreement and to receive a termination fee in the amount of $25 million. See “The Merger Agreement — Termination Fee and Expense Reimbursement.” Sims required Metal Management to agree to these provisions as a condition to Sims’s willingness to enter into the merger agreement. However, these provisions might discourage a potential competing acquirer that might have an interest in acquiring all or a significant part of Metal Management from considering or proposing that acquisition, even if it were prepared to pay consideration with a higher per share market price than that proposed in the merger, or it might result in a potential competing acquirer proposing to pay a lower per share price to acquire Metal Management than it might otherwise have proposed to pay.

 

Metal Management’s executive officers and directors have financial interests in the merger that are different from, or in addition to, your interests.

 

Executive officers of Sims and Metal Management negotiated the terms of the merger agreement, and the Metal Management board of directors approved and recommended that Metal Management’s stockholders vote to adopt the merger agreement. In considering these facts and the other information contained in this document, you should be aware that Metal Management’s executive officers and directors have financial interests in the transaction that are different from, or in addition to, the interests of Metal Management’s stockholders. For instance, each outstanding unvested Metal Management stock option and share of restricted stock held by any director, officer or employee will become fully vested upon completion of the merger. Also, Metal Management’s chief executive officer and chief financial officer have entered into modifications to their respective employment agreements pursuant to which their compensation will increase following the merger. The Metal Management board of directors was aware of these interests and considered them, among other matters, in approving the merger agreement and the transactions contemplated thereby. See “The Merger — Interests of Directors and Executive Officers in the Merger” for information about these financial interests.

 

The merger is subject to the receipt of consents and approvals from government entities that may impose conditions that could have an adverse effect on Sims Metal Management and the failure to obtain any such consent or approval may result in the termination of the merger.

 

Before the merger may be completed, consents, authorizations, orders and approvals of or filings with various governmental commissions, boards or other regulatory authorities in the United States and certain other countries must be obtained. These governmental entities, including the Antitrust Division of the United States Department of Justice and the United States Federal Trade Commission, may impose conditions on the completion of the merger or require changes to the terms of the merger. While Sims and Metal Management do not currently expect that any such conditions or changes will be imposed, there can be no assurance that there will not be, and such conditions or changes could have the effect of delaying completion of the merger or imposing additional costs on, or limiting the revenues of, the combined company, any of which might have a material adverse effect on the combined company following completion of the merger. Each of Sims and Metal Management is obligated to use its reasonable best efforts to obtain all such governmental consents and approvals, but neither party is obligated to enter into any agreement or take any other action in order to obtain any such governmental consent or approval if such agreement or action would result in reduction of 5% or more of the aggregate tonnage of ferrous metal processed, on an annual basis, by Sims and Metal Management, taken as a whole, compared with the operations of Sims and Metal Management for the 12 months ended June 30, 2007, or would otherwise have a material adverse

effect on the business of Sims or Metal Management or on the ability of Sims or Metal Management to consummate the merger and perform their respective obligations under the merger agreement.

 

Risks Relating to the Operations of Sims Metal Management Following the Merger

 

Set forth below are risks that the boards of directors of Sims and Metal Management believe may be material to the combined business operations of Sims Metal Management after completion of the merger. Additional risks and uncertainties that are presently unknown or deemed to be immaterial may also impair the business operations of the combined company after completion of the merger.

 

The parties may not realize all of the anticipated benefits of the merger.

 

The success of the merger will depend, in part, on the ability to realize the anticipated benefits from combining the businesses of Sims and Metal Management. However, to realize these anticipated benefits, Sims and Metal Management must successfully combine their businesses, which are currently principally conducted in different countries by management and employees coming from different cultural backgrounds. If Sims and Metal Management are not able to achieve these objectives, the anticipated benefits of the transaction may not be realized fully, may take longer to realize than expected or may not be realized at all. Sims and Metal Management have operated and, until the completion of the merger, will continue to operate, independently. It is possible that the integration process could result in the loss of key employees, the disruption of each company’s ongoing businesses or inconsistencies in standards, controls, procedures and policies that adversely affect the ability of the combined company to maintain relationships with customers, suppliers and employees or to achieve the anticipated benefits of the merger. Integration efforts between the two companies will also divert management’s attention and resources. These integration matters could have an adverse effect on each of Metal Management and Sims during the transition period and on the combined company following completion of the merger.

 

The metal recycling industry has historically been, and is expected to remain, highly cyclical and demand from individual export markets, which will be important to Sims Metal Management, is volatile.

 

The operating results of the metal recycling industry, in general, have historically been, and are expected to remain, highly cyclical in nature and Sims Metal Management’s operations, specifically, are expected to be highly cyclical in nature. The results of Sims Metal Management’s operations will tend to reflect, and be amplified by, changes to general economic conditions, both domestically and internationally. Historically, in periods of recession or periods of slowing economic growth, the results from operations of metal recycling companies have been materially and adversely affected. For example, during recessions or periods of slowing economic growth, the automobile and the construction industries typically experience major cutbacks in production, resulting in decreased demand for steel, copper and aluminum, and it would be expected that, during such periods, there would be significant fluctuations in demand and pricing for Sims Metal Management’s products. Economic downturns in the United States or internationally will likely materially and adversely affect Sims Metal Management’s results of operations and financial condition. Sims Metal Management’s ability to withstand significant economic downturns or recessions in the future will depend, in part, on its level of capital and liquidity at the time. Sims Metal Management’s business may also be adversely affected by increases in steel imports into the United States or other significant market regions, such as Australia, the United Kingdom and New Zealand, which may have an adverse impact on steel production in such market regions and a corresponding adverse impact on the demand for recycled metals from some of Sims Metal Management’s facilities within such market regions. Additionally, the combined company’s business could be negatively affected by changes in currency exchange rates, changes in tariffs, or increased freight costs which could negatively impact export sales or attract imports of recycled metal or metal substitutes, reducing demand for the combined company’s recycled metals. When metals markets weaken, if Sims Metal Management is unable to reduce its costs commensurately, the combined company could experience a material decline in earnings. A material decline in earnings could negatively affect cash flows and capitalization and the market price for Sims ordinary shares and Sims ADSs.

Sims Metal Management will be subject to significant risks relating to changes in commodity prices, currency exchange rates and interest rates, and may not be able to effectively protect against these risks.

 

Sims Metal Management will be exposed to commodity price risk during the period that it has title to products that are held in inventory for processing or resale. Prices of commodities, including recycled metals, can be volatile due to numerous factors beyond the combined company’s control. In an increasing price environment for raw materials, competitive conditions may limit Sims Metal Management’s ability to pass on price increases to its consumers. In a decreasing price environment for processed recycled metal, the combined company may not have the ability to fully recoup the cost of raw materials it procures, processes and sells to its customers. New entrants into its markets could result in higher purchase prices for raw materials and lower margins from its recycled metal. Sims Metal Management will not be able to hedge positions in certain commodities, such as recycled ferrous metal, where no established futures market exists. Thus, Sims Metal Management’s sales and inventory position will be vulnerable to adverse changes in commodity prices, which could materially adversely impact the combined company’s operating and financial performance. Sims Metal Management will operate a global trading business that is involved in the purchase and sale of ferrous steel making raw materials without a corresponding sale or purchase. At any one time, this global trading business may have a material number of “open” or at risk trading positions. To the extent that markets move in an adverse direction and Sims Metal Management has not hedged its position, this will have an adverse impact on profitability. As a company that will operate in many countries, Sims Metal Management will also be exposed to movements in currency exchange rates, the impact of which cannot be reliably predicted. Following completion of the merger, Sims Metal Management will report its financial results in Australian dollars. The combined company will have significant assets, liabilities and earnings denominated in currencies other than the Australian dollar, in particular U.S. dollars, pounds sterling and euros. These assets, liabilities and earnings, therefore, will be exposed to fluctuations in exchange rates between these currencies and the Australian dollar. Currency exchange rates have been extremely volatile in recent periods. In addition, Sims Metal Management will have significant indebtedness for borrowed money, some or all of which may provide for variable interest rates. It may not be possible for Sims Metal Management to effectively hedge against changes in interest rates at all or on an economically reasonable basis. Increases in interest rates could materially increase the borrowing costs of the combined company and could have a material adverse effect on its results of operations and financial condition.

 

The loss of export sales could adversely affect the results of operations and financial condition of Sims Metal Management.

 

A significant portion of the sales of recycled metal by Sims Metal Management following completion of the merger is expected to be exported to markets outside of the United States and Australia, with significant sales to customers in China, Turkey, India, Malaysia and other individual markets. If sales to these individual markets were to decline significantly for any reason and alternative markets could not be found at comparable market prices, it could materially adversely affect the results of operations and financial condition of Sims Metal Management. Other risks associated with the export business of the combined company include, among other factors, political and economic factors, economic conditions in the world’s economies, changes in legal and regulatory requirements, changes in currency exchange rates applicable to the U.S. dollar, Australian dollar and the currencies of other countries in which Sims Metal Management operates, purchases or exports recycled metal, freight costs and customer collection risks. Any of these factors could result in lower export sales, which could have a material adverse effect on the results of operations and financial condition of Sims Metal Management.

 

Sims Metal Management will be subject to increasing competition from containerized recycled metal exports.

 

Sims Metal Management will generate a significant proportion of its earnings from the export of recycled metals. Recently, there has been a significant increase in the number of empty containers at ports in the United States, Australia, the United Kingdom and elsewhere which may be used for exporting materials at a relatively low cost because vessel operators provide lower freight costs to container shippers relative to bulk

shippers. Small recycled metal operators have taken advantage of this situation by exporting significant quantities of recycled metals in containers in competition with Sims and Metal Management. The increasing competition from containerized recycled metal exports may reduce Sims Metal Management’s export gross margin on sales or volumes and, accordingly, may have a material adverse impact on the results of operations and financial condition of Sims Metal Management.

 

The concentration of the customers of Sims Metal Management or the termination of material customer contracts could have a material adverse effect on the results of operations and financial condition of the combined company.

 

Sales to the 10 largest customers of Sims and Metal Management represented approximately 25% of combined consolidated net sales on a pro forma basis for the 12-month period ended June 30, 2007. Accounts receivable balances from these customers comprised approximately 20% of combined consolidated accounts receivable on a pro forma basis as of June 30, 2007. Sims and Metal Management have not generally had long term contracts with their customers and it is not expected that Sims Metal Management will have a significant number of long term contracts with its customers following completion of the merger. The customers of Sims Metal Management will therefore generally have the ability to terminate or modify their contracts with the combined company on short notice without the payment of penalties or other amounts. The loss of significant customers of the combined company, a deterioration in the financial condition of significant customers of the combined company, or the termination of one or more material customer contracts could have a material adverse effect on the results of operations and financial condition of Sims Metal Management.

 

Potential credit losses from Sims Metal Management’s significant customers could adversely affect the combined company’s results of operations and financial condition.

 

In connection with the sale of products, Sims Metal Management generally will not require collateral as security for customer receivables nor will it necessarily purchase credit insurance. Sims Metal Management and certain of its subsidiaries may have significant balances owing from customers that operate in cyclical industries and under leveraged conditions that may impair the collectibility of those receivables. Failure to collect a significant portion of amounts due on those receivables could have a material adverse effect on Sims Metal Management’s results of operations and financial condition.

 

The profitability of the metal recycling operations of Sims Metal Management will depend, in part, on the availability of an adequate source of supply.

 

Following completion of the merger, Sims Metal Management will procure its recyclable metal inventory from numerous sources, as each of Sims and Metal Management has done historically. These suppliers generally are not bound by long-term contracts and will have no obligation to sell recyclable metal to the combined company. In periods of low industry prices, suppliers may elect to hold recyclable metal to wait for higher prices or intentionally slow their metal collection activities. If a substantial number of suppliers cease selling recyclable metal to Sims Metal Management, the combined company will be unable to recycle metals at desired levels and its results of operations and financial condition could be materially adversely affected. In addition, a slowdown of industrial production in the United States or certain other countries would reduce the supply of industrial grades of metal to the metal recycling industry, resulting in Sims Metal Management having less recyclable metal available to process and market.

 

A significant increase in the use of substitute materials by consumers of processed recycled ferrous metal could reduce demand for the products of Sims Metal Management.

 

During periods of high demand, tightness can develop in the available supply of recycled ferrous metal. The relative scarcity of recycled ferrous metal, particularly prime or industrial grades, during such periods, provides opportunities for producers of substitute products, such as pig iron and direct reduced iron pellets. It cannot be assured that the use of substitutes to recycled ferrous metal will not proliferate in the future if the prices for recycled metal rise or if the supply of available unprepared ferrous metal tightens. A number of third parties around the world are working on ways to produce recycled ferrous metal substitutes. If these

efforts prove successful, they could become significant competitors and materially adversely impact the results of operations and financial condition of Sims Metal Management.

 

Sims Metal Management’s operations will be subject to extensive governmental regulation in each of the jurisdictions in which it operates.

 

In each of the jurisdictions in which it will operate, Sims Metal Management will be subject to a variety of laws and regulations relating to trade, competition, taxes, employees and employee benefits, worker health and safety, land use, the environment and other matters. Sims Metal Management may be required to make significant expenditures and to devote substantial management time and attention in order to operate its business in compliance with such laws and regulations. In addition, changes in these laws or regulations or their interpretations or enforcement may require Sims Metal Management to make significant additional expenditures or to change its business practices. If Sims Metal Management fails to comply with applicable laws and regulations, it could incur criminal or civil fines, penalties, assessments or other damages, which could be substantial, and could have material restrictions or limitations placed on its business operations. In certain cases, governmental compliance actions may also give rise to potential claims for damages by private parties.

 

Sims Metal Management’s operations will be subject to stringent environmental laws and regulations.

 

Following completion of the merger, Sims Metal Management will be subject to comprehensive statutory and regulatory environmental requirements relating to, among others:

 

 

The nature of Sims Metal Management’s business and previous operations by others at facilities currently or formerly owned or operated or otherwise used by the combined company will expose the combined company to risks of claims under environmental laws and regulations, especially for the remediation of soil or groundwater contamination. Sims Metal Management may be required to make material expenditures for remedial activities or capital improvements with regard to sites currently or formerly owned or operated or otherwise used by the combined company.

 

Environmental statutes and regulations have changed rapidly in recent years by requiring greater and more expensive protective measures, and it is possible that Sims Metal Management will be subject to even more stringent environmental standards in the future. For example, in many jurisdictions in which Sims Metal Management will operate, there is the potential for regulation and or legislation relating to mercury contaminants. Automobile hulks that are purchased and processed by the combined company may contain mercury switches. Legislation or regulations that may be enacted in the future cannot be presently known and neither can the effects, if any, that any such law or regulation could have on Sims Metal Management’s business. For these reasons and others, the future capital expenditures for pollution control equipment, remediation or other initiatives that may be required cannot be predicted with accuracy. However, it is generally expected that environmental standards will become increasingly more stringent and that the expenditures necessary to comply with those heightened standards will correspondingly increase.

 

Sims Metal Management will be required to maintain, and to comply with, various permits and licenses to conduct its operations. Failure to maintain, or violations of, any permit or license, if not remedied, could result in the combined company incurring substantial fines, suspension of operations or closure of a site. Further, Sims Metal Management’s operations are conducted primarily outdoors and, as such, depending on the nature of the ground cover, such outdoor operations will involve the risk of releases of wastes and other regulated materials to the soil and, possibly, to groundwater. As part of the combined company’s continuous improvement programs, the combined company will incur costs to improve environmental control systems.

Because companies in the metal recycling industry have the potential for discharging wastes or other regulated materials into the environment, in any given year, a significant portion of Sims Metal Management’s capital expenditures could be related, directly or indirectly, to pollution control or environmental remediation.

 

The operations of Sims Metal Management will generate waste that will need to be treated, stored and disposed of in accordance with applicable environmental laws.

 

Sims Metal Management’s metal recycling operations will produce significant amounts of waste that it will be required to pay to have treated or discarded. For example, Sims Metal Management will operate shredders for which the primary feedstock is automobile hulks and obsolete household appliances. Approximately 20% of the weight of an automobile hulk consists of non-metallic material, commonly referred to as shredder fluff or automobile shredder residue, which is referred to as ASR, which constitutes the remnant material after the separation of saleable ferrous and non-ferrous metals. Environmental regulations in the United States and many other countries in which Sims Metal Management will operate will require that Sims Metal Management test ASR to determine if it is to be classified as hazardous waste before disposing of it off-site in permitted landfills. Sims Metal Management’s other waste streams in the United States and other countries in which it will operate will be subject to similar requirements. Additionally, Sims Metal Management will employ significant source control programs to ensure, to the fullest extent possible, that prohibited hazardous materials do not enter its raw materials stream. However, it cannot be assured that such materials will be successfully removed from Sims Metal Management’s source streams and resultant recycling by-products. As a result, Sims Metal Management’s waste streams may, from time to time, be classified as a hazardous waste in which case the combined company may incur higher costs for disposal of these waste products.

 

Environmental assessments, conducted by independent environmental consulting firms, of certain of the operating sites that Sims Metal Management will own upon the completion of the merger have revealed that some soil impacts, potentially including impacts associated with various metals, petrochemical by-products, waste oils, polychlorinated biphenyls, which are referred to as PCBs, and volatile organic compounds are, or may be, present at varying levels. It is likely that such impacts at varying levels may exist at some of the sites and it is expected that some of these sites could require investigation, monitoring and remediation in the future. The costs of such remediation could be significant. The existence of such impacts at some of the facilities of Sims Metal Management potentially could require the combined company to incur significant costs to remediate and could materially adversely affect the combined company’s ability to sell those properties.

 

Following completion of the merger, Sims Metal Management may have potential environmental investigation and cleanup liabilities.

 

Certain U.S. subsidiaries of Metal Management have received notices from the United States Environmental Protection Agency, which is referred to as the USEPA, state agencies or third parties that they have been identified as potentially responsible for the cost of investigation and cleanup of landfills or other sites where the subsidiary’s material was shipped. In most cases, many other parties are also named as potentially responsible parties. The Comprehensive Environmental Response, Compensation and Liability Act, which is referred to as CERCLA, enables USEPA and other United States’ regulatory agencies to recover from owners, operators, generators and transporters the cost of investigation and cleanup of sites which pose serious threats to the environment or public health. In certain circumstances, a potentially responsible party can be held jointly and severally liable for the cost of cleanup. In other cases, a party who is liable may only be liable for a divisible share. Liability can be imposed even if the party shipped materials in a lawful manner at the time of shipment. Liability for investigation and cleanup costs can be significant, particularly in cases where joint and several liability may be imposed. CERCLA, including the Superfund Recycling Equity Act of 1999, limits the exposure of metals recyclers for sales of certain recyclable material under certain circumstances. However, the recycling defense is subject to conducting reasonable care evaluations of current and potential consumers. Because CERCLA can be imposed retroactively on shipments that occurred many years ago, and because USEPA and state agencies are still discovering sites that present problems to public health or the environment,

it cannot be assured that Sims Metal Management will not become liable in the future for significant costs associated with investigation and remediation of CERCLA waste sites.

 

Sims Metal Management will not have environmental impairment insurance.

 

In general, because it believes that the cost of the premiums outweighs the benefit of coverage, Sims Metal Management is not expected to carry environmental impairment liability insurance. If Sims Metal Management were to incur significant liability for environmental damage, such as a claim for soil or groundwater remediation, its results of operations and financial condition could be materially adversely affected.

 

Sims Metal Management’s operations will present risk of injury or death.

 

Because of the heavy industrial activities that will be conducted at Sims Metal Management’s facilities, there exists a risk of serious injury or death to Sims Metal Management’s employees or other visitors to its operations, notwithstanding the safety precautions that are taken. Sims Metal Management’s United States operations and its operations in certain other countries will be subject to regulation by governmental agencies responsible for employee health and safety. Sims and Metal Management currently have in place policies to minimize the risk to employees and other visitors to their respective facilities and, accordingly, to minimize the risk that Sims and Metal Management will incur government fines for violations of such regulations. Sims Metal Management may, nevertheless, be unable to avoid material liabilities for any death or injury that may occur in the future and these types of incidents may have a material adverse effect on Sims Metal Management’s results of operations and financial condition.

 

The loss of any member of the senior management team of Sims Metal Management or a significant number of its managers could have a material adverse effect on Sims Metal Management’s results of operations and financial condition.

 

After the completion of the merger, Sims Metal Management’s operations will depend heavily on the skills and efforts of its senior management team. In addition, Sims Metal Management will rely substantially on the experience of the management of its businesses with regard to day-to-day operations. While Sims Metal Management will have employment agreements with certain of the members of its senior management team, the combined company may be unable to retain the services of any of those individuals. The loss of any member of the senior management team of Sims Metal Management or a significant number of managers could have a material adverse effect on the combined company’s results of operations and financial condition.

 

Sims Metal Management may not be able to negotiate future labor contracts on favorable terms.

 

A significant percentage of Sims Metal Management’s employees will be represented by various labor unions. As the agreements with those unions expire, Sims Metal Management may not be able to negotiate extensions or replacements on terms favorable to it, or at all, or avoid strikes, lockouts or other labor actions from time to time. Therefore, it cannot be assured that new labor agreements will be reached with Sims Metal Management’s unions as those labor contracts expire or on terms that Sims Metal Management finds desirable. Any labor action resulting from the failure to reach an agreement with Sims Metal Management’s unions could have an adverse effect on the combined company’s results of operations and financial condition.

 

Sims Metal Management will be obligated to contribute to defined benefit pension plans, some of which are underfunded.

 

Metal Management and Sims currently contribute to defined benefit pension plans that cover various categories of employees and retirees. The obligation to make contributions to fund benefit obligations under these pension plans is based on actuarial valuations, which are based on certain assumptions, including the long-term return on plan assets and discount rate. Three of the Metal Management defined benefit pension plans were underfunded by approximately $1.8 million as of June 30, 2007. Sims Metal Management will have to make additional contributions following completion of the merger to fund its pension benefit plans. Contributions will negatively impact its cash flow and results of operations. In addition, Sims Metal

Management will contribute to various multi-employer pension plans which cover employees under collective bargaining agreements. The required contributions are specified in such collective bargaining agreements. However, Sims Metal Management may be required to fund additional amounts in the future if one or more of these multi-employer plans do not meet the Employee Retirement Income Security Act funding guidelines. Additional contributions will negatively impact Sims Metal Management’s cash flow, results of operations and financial condition.

 

Sims Metal Management will incur higher expense related to the amortization of intangible assets and may be required to report losses resulting from the impairment of goodwill or other assets recorded in connection with the merger or other completed or future acquisitions.

 

The merger will be treated as an acquisition of Metal Management by Sims for accounting purposes. Both Sims and Metal Management have in the past expanded their operations through other acquisitions and joint ventures involving metal recycling businesses owned by third parties. Sims Metal Management expects to continue to complete selected acquisitions and joint venture transactions in the future. In connection with acquisition and joint venture transactions, applicable accounting rules generally require the tangible and certain intangible assets of the acquired business to be recorded on the balance sheet of the acquiror at their fair market value. Intangible assets other than goodwill will be required to be amortized over their estimated useful lives and this expense may be significant. Any excess in the purchase price paid by the acquiror over the fair market value of tangible and intangible assets of the acquired business is recorded as goodwill. If it is later determined that the anticipated future cash flows from the acquired business will be less than the fair market value of the assets and goodwill of the acquired business recorded at the time of the acquisition, the assets or goodwill may be deemed to be impaired. In this case, the acquiror may be required under applicable accounting rules to write down the value of the assets or goodwill on its balance sheet to reflect the extent of the impairment. This write down of assets or goodwill is generally recognized as a non-cash expense in the statement of operations of the acquiror for the accounting period during which the write down occurs. If Sims Metal Management determines that any of the assets or goodwill recorded in connection with the merger or any other prior or future acquisitions or joint venture transactions have become impaired, Sims Metal Management will be required to record a loss resulting from the impairment. The metal recycling industry is highly cyclical and, as a result, Sims Metal Management may be more likely than companies in other industries to incur impairment losses. Impairment losses could be significant and could have a material adverse effect on the results of operations and financial condition of Sims Metal Management, and could have a material adverse affect on its ability to pay dividends.

 

Since Sims was not subject to SEC rules prior to the merger, significant expenditures and senior management time may be required with respect to Sims Metal Management’s internal controls to ensure compliance with the requirements of Section 404 of the Sarbanes Oxley Act of 2002.

 

Section 404 of the Sarbanes Oxley Act of 2002 and the regulations of the SEC thereunder will require senior executive and senior financial officers of Sims Metal Management to assess the effectiveness of its internal control over financial reporting on an annual basis commencing with the 12-month period ending June 30, 2009. Sims Metal Management’s independent registered public accounting firm will also be required to provide a report with respect to Sims Metal Management’s internal control over financial reporting annually commencing with the 12-month period ending June 30, 2009. To the extent that Sims Metal Management is discovered to have deficient internal controls, the combined company may be required to allocate significant monetary and management resources to remedy the deficiencies that could otherwise be devoted to its business operations. Management for Sims and Metal Management believe that Sims Metal Management may incur additional expenditures of approximately $3 million in its first year after completion of the merger to ensure compliance with the requirements of Section 404 of the Sarbanes Oxley Act of 2002.

 

Sims Metal Management will be exposed to the risk of legal claims and other liabilities that may have a material adverse effect on its results of operations and financial condition.

 

Sims Metal Management will be exposed to the risk of legal claims and other liabilities arising in connection with the operation of its business that may have a material adverse effect on the results of operations and financial condition of Sims Metal Management. These claims and liabilities may include claims

by employees or former employees relating to personal injury, compensation or employment law violations, environmental, land use and other claims arising out of the ownership or operation of facilities, and disputes with customers, suppliers and other business relations. The nature of Sims Metal Management’s business may make the company more likely than some other companies to be exposed to the risk of legal claims and other liabilities. In particular, metal recycling companies are generally exposed to higher risks of environmental claims and liabilities than companies in non-manufacturing industries, and employees working in the metal recycling industry may be more likely to suffer workplace injuries than employees of companies in other industries. The resolution of these claims and other liabilities may require Sims Metal Management to pay material damages or other costs to third parties, including potentially punitive, treble, exemplary or other special damages. Resolution of claims may also involve an extensive commitment of senior management time and attention, and may require changes in the business practices resulting in decreased revenues or profits or additional costs. Even if claims or other liabilities are resolved successfully, Sims Metal Management may incur significant legal and other expenses in defending against such matters.

 

The tax liabilities of Sims Metal Management may substantially increase if the tax laws and regulations in the countries in which it will operate change or become subject to adverse interpretations or inconsistent enforcement.

 

Taxes payable by companies in many of the countries in which Sims Metal Management will operate are substantial and include value added tax, excise duties, taxes on income (including profits and capital gains), payroll related taxes, property taxes and other taxes. Tax laws and regulations in some of these countries may be subject to frequent change, varying interpretation and inconsistent enforcement. In addition, many of the jurisdictions in which Sims Metal Management will operate have adopted transfer pricing legislation. If tax authorities impose significant additional tax liabilities as a result of transfer pricing adjustments, it could have a material adverse effect on Sims Metal Management’s results of operations and financial condition. It is possible that taxing authorities in the countries in which Sims Metal Management will operate will introduce additional revenue raising measures. The introduction of any such provisions may affect the overall tax efficiency of the combined company and could result in significant additional taxes becoming payable. Any such additional tax exposure could have a material adverse effect on Sims Metal Management’s results of operations and financial condition. Sims Metal Management may face a significant increase in its income taxes if tax rates increase or the tax laws or regulations in the jurisdictions in which it will operate or treaties between those jurisdictions are modified in an adverse manner. This may adversely affect Sims Metal Management’s cash flows, liquidity and ability to pay dividends.

 

The operations of Sims Metal Management will be subject to risks and uncertainties relating to international conflicts and terrorism.

 

Sims Metal Management will be subject to risks relating to international conflicts, wars, internal civil unrest, trade embargoes and acts of terrorism. Sims Metal Management may be subject to a higher level of risks of this type than some other companies due to its extensive international operations. These operations will include sales in developing countries, which may be more likely than developed countries to be affected by international conflicts and terrorism. Risks of this type may affect facilities owned or operated by Sims Metal Management or facilities of its suppliers or customers. In addition, risks of this type may affect port facilities or other transportation infrastructure owned or used by Sims Metal Management in the operation of its business.

 

United States investors may have difficulty enforcing civil liabilities against Sims Metal Management and its directors and senior management.

 

Sims Metal Management will be organized under the laws of Australia. Following the merger, several of Sims Metal Management’s directors and many members of its senior management will be residents of jurisdictions outside the United States. A significant portion of Sims Metal Management’s assets and the assets of these persons will be located outside the United States. As a result, United States investors may find it difficult to effect service of process within the United States upon Sims Metal Management or these persons or to enforce outside the United States judgments obtained against Sims Metal Management or these persons in United States courts, including actions predicated upon the civil liability provisions of the United States

federal securities laws. Likewise, it may also be difficult for an investor to enforce in United States courts judgments obtained against Sims Metal Management or these persons in courts in jurisdictions outside the United States, including actions predicated upon the civil liability provisions of the United States federal securities laws. It may also be difficult for a United States investor to bring an original action in an Australian court predicated upon the civil liability provisions of the United States federal securities laws against the combined company’s directors and senior management and non-United States experts named in this proxy statement/prospectus.

 

CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING INFORMATION

 

This proxy statement/prospectus contains or incorporates by reference a number of forward-looking statements, including statements about the financial conditions, results of operations, earnings outlook and prospects of Sims, Metal Management and Sims Metal Management and may include statements for the period following completion of the merger. 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.

 

The forward-looking statements involve certain risks and uncertainties. The ability of either Sims or Metal Management to predict results or the actual effects of its plans and strategies, or those of Sims Metal Management, is subject to inherent uncertainty. Factors that may cause actual results or earnings to differ materially from such forward-looking statements include those set forth above under “Risk Factors” and those discussed and identified in filings made with the SEC by Metal Management.

 

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 proxy statement/prospectus or the date of any document incorporated by reference in this proxy statement/prospectus.

 

Factors that could cause actual results to differ materially from those contemplated by the forward-looking statements include, among others, the following factors:

 

 

All subsequent written and oral forward-looking statements concerning the transaction or other matters addressed in this proxy statement/prospectus and attributable to Sims or Metal Management or any person acting on their behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this proxy statement/prospectus. Except to the extent required by applicable law or regulation, Sims and Metal Management undertake no obligation to update these forward-looking statements to reflect events or circumstances after the date of this proxy statement/prospectus or to reflect the occurrence of unanticipated events.

 

The special meeting of Metal Management stockholders will be held at 10:00 a.m., local time, on March 14, 2008, at the offices of King & Spalding LLP, 1185 Avenue of the Americas, 34th Floor, New York, New York.

 

At the Metal Management special meeting, Metal Management stockholders will be asked:

 

 

The record date for the special meeting is January 25, 2008. This means that you must have been a stockholder of record of Metal Management’s common stock at the close of business on that date in order to vote at the special meeting. You are entitled to one vote for each share of Metal Management common stock you own. On Metal Management’s record date, Metal Management had 26,141,746 shares of common stock outstanding.

 

A complete list of Metal Management stockholders entitled to vote at the Metal Management special meeting will be available for inspection at the executive offices of Metal Management during regular business hours no less than ten days prior to the special meeting.

 

The affirmative vote of the holders of a majority of the outstanding shares of Metal Management common stock entitled to vote at the special meeting as of the record date, voting either in person or by proxy, is necessary for adoption of the merger agreement. If necessary, approval of a proposal to adjourn the Metal Management special meeting for the purpose of, among other things, soliciting additional proxies requires the affirmative vote of the holders of a majority of the shares of Metal Management common stock present in person or represented by proxy and entitled to vote at the special meeting, whether or not a quorum is represented.

 

The holders of a majority of the total number of outstanding shares of Metal Management common stock entitled to vote as of the record date, represented either in person or by proxy, will constitute a quorum at the Metal Management special meeting.

 

If you are a Metal Management stockholder you may vote for or against the proposals submitted at the Metal Management special meeting in person.

 

If you do not wish to vote in person or you will not be attending the special meeting, you may vote by proxy. You may vote by proxy over the Internet, over the telephone or by mail. The procedures for voting by proxy are as follows:

 

 

 

If you vote by proxy on the Internet or by telephone, your vote must be received by 11:59 p.m., United States Eastern time, on March 13, 2008 to be counted.

 

Metal Management is providing Internet proxy voting to allow you to vote your shares on-line, with procedures designed to ensure the authenticity and correctness of your proxy vote instructions. However, please be aware that you must bear any costs associated with your Internet access, such as usage charges from Internet access providers and telephone companies.

 

All shares entitled to vote and represented by properly completed proxies received prior to the Metal Management special meeting, and not revoked, will be voted at the Metal Management special meeting as instructed on the proxies. If you do not indicate how your shares should be voted on a matter, the shares represented by your properly completed proxy will be voted “FOR” adoption of the merger agreement and as the Metal Management board of directors recommends on any other proposals properly brought before the special meeting.

 

You may revoke your proxy at any time before it is exercised by timely delivering a properly executed, later-dated proxy (including over the Internet or telephone), delivering a notice of revocation to Metal Management’s corporate secretary, or by voting by ballot at the Metal Management special meeting. Simply attending the Metal Management special meeting without voting will not revoke your proxy.

 

If your shares of Metal Management common stock are held in an account at a broker, bank or other nominee and you wish to vote, you must return your instructions to the broker, bank or nominee. If you do not provide your broker with instructions, your broker will not be authorized to vote on the proposal to approve the merger agreement and the plan of merger contained therein. This will have the same effect as a vote against the proposal.

 

If you wish to vote on the proposal to approve adjournments of the Metal Management special meeting, you should provide instructions to your broker. If you do not provide instructions to your broker, your broker will not be authorized to vote on any proposal to adjourn the special meeting solely relating to the solicitation of proxies to approve the merger agreement and the plan of merger contained therein.

 

If you own shares of Metal Management common stock through a broker, bank or other nominee and attend the Metal Management special meeting, you should bring a letter from your broker, bank or other nominee identifying you as the beneficial owner of such shares of Metal Management common stock and authorizing you to vote.

 

This solicitation is made on behalf of the Metal Management board of directors. Metal Management will be responsible for all costs of soliciting proxies, including charges made by brokers and others holding common stock in their names or in the names of nominees, for reasonable expense incurred in sending proxy materials to beneficial owners and obtaining their proxies. In addition to solicitation by mail, directors, officers and employees of Metal Management may solicit proxies personally and by telephone, all without extra compensation. Metal Management has engaged the firm of Georgeson Inc. to assist Metal Management in the distribution and solicitation of proxies, which will be paid a fee of $10,000 plus out-of-pocket expenses for its services.

 

Assistance

 

Stockholders who have questions regarding the materials, need assistance voting their shares or require additional copies of the proxy statement or proxy card should contact or call (toll-free):

 

Georgeson Inc.
17 State Street
New York, New York 10004
Telephone: (866) 288-2196
Facsimile: (212) 440-9009

 

Other Business

 

We are not currently aware of any business to be acted upon at the Metal Management special meeting other than matters discussed in this proxy statement/prospectus. Under the Delaware General Corporation Law, business transacted at the special meeting is limited to matters specifically designated in the notice of special meeting, which is provided at the beginning of this proxy statement/prospectus. If other matters do properly come before the special meeting, Metal Management intends that shares of its common stock represented by properly submitted proxies will be voted by persons named as proxies on the proxy card in accordance with the recommendation of Metal Management’s board of directors.

 

THE MERGER

 

The following discussion contains material information pertaining to the merger. This discussion is subject and qualified in its entirety by reference to the merger agreement and the related documents attached as Appendices to this proxy statement/prospectus. You should read the entirety of those documents as well as the discussion in this proxy statement/prospectus.

 

Structure of the Merger

 

The merger agreement provides for the merger of Metal Management and MMI Acquisition Corporation. Upon completion of the merger, the separate corporate existence of MMI Acquisition Corporation will cease and Metal Management will continue as the surviving entity and as a wholly owned subsidiary of Sims. The combined company will be renamed “Sims Metal Management Limited,” subject to approval by the holders of Sims ordinary shares. At the effective time of the merger, each issued and outstanding share of Metal Management common stock will be converted into the right to receive 2.05 Sims ADSs, with each Sims ADS representing one Sims ordinary share.

 

Upon completion of the merger, it is estimated that Metal Management’s former stockholders will own approximately 30% and Sims’s shareholders will own approximately 70% of the then combined outstanding Sims ordinary shares and ADSs. Sims’s shareholders will continue to own their existing shares, which will not be changed by the merger. Sims ordinary shares will continue to be listed on the ASX under the trading code “SGM” and, upon completion of the merger, Sims ADSs will be listed on the NYSE under the trading symbol “SMS.” Upon completion of the merger, Metal Management common stock, which is listed on the NYSE under the trading symbol “MM,” will be delisted.

 

Background of the Merger

 

At various times over the years, the board of directors of each of Sims and Metal Management has considered the possibility of acquisitions, combinations and other business strategies and has engaged with senior management in strategic reviews, with a goal of enhancing shareholder value. Moreover, each company has engaged in a number of acquisitions over the last several years.

 

In late 2006, against the backdrop of a rapidly changing and evolving global commodities landscape, Mr. Dienst asked Robert Lewon, a Metal Management board member who was a former Sims executive, to arrange a meeting and dialogue with Mr. Sutcliffe. The intentions at that time were to learn about the culture and long-term plans of a public peer and to determine if there were similar goals for creating value for their respective shareholders. On April 17, 2007, Messrs. Dienst and Sutcliffe met informally and discussed in general terms the possibility of Sims and Metal Management entering into a business combination involving Sims’s North American metal recycling operations. They agreed to continue to discuss the possibility of a business combination.

 

On April 26, 2007, Sims and Metal Management executed a mutual confidentiality agreement and agreed to exchange high level financial information.

 

At a Metal Management board of directors meeting on April 27, 2007, Mr. Dienst informed the board of his preliminary discussions with Mr. Sutcliffe concerning a possible business combination and indicated that the companies would exchange financial data to allow them to be able to analyze whether the companies would proceed with further discussions. Mr. Dienst described the possible structure for a business combination and some of the opportunities and risks presented by a possible transaction. The board encouraged Mr. Dienst to continue to investigate a possible transaction.

 

On April 28, 2007, at the direction of Metal Management and Sims, CIBC World Markets, Metal Management’s financial advisor, and UBS AG, Australia Branch and UBS Securities LLC, which are referred to together as UBS, financial advisor to Sims, discussed a possible transaction involving the two companies and what type of financial data Metal Management and Sims could exchange in order to assist in valuation discussions. During the next six weeks, the respective financial advisors of Metal Management and Sims engaged in periodic discussions regarding valuation matters.

On May 10, 2007, Mr. Sutcliffe informed Mr. Dienst that Mr. Sutcliffe had met with Paul K. Mazoudier, the chairman of the board of Sims, and representatives of UBS to discuss the proposed transaction. Mr. Sutcliffe described the principal issues he believed needed to be discussed with Mr. Dienst when they were to meet in London on May 25, 2007, including relative valuation, respective equity ownership, board composition and management structure.

 

Between May 10 and June 7, 2007, Messrs. Dienst and Sutcliffe continued to communicate about the transaction.

 

On May 22, 2007, the Metal Management board held a meeting. At the meeting, Mr. Dienst updated the board on the discussions with Sims concerning the possible acquisition by Metal Management of Sims’s North American metal recycling operations. Mr. Dienst noted that the transaction structure could be complex and any transaction of this scale was less than certain.

 

On May 25, 2007, Mr. Sutcliffe, Mr. Dienst, Norman R. Bobins, a Metal Management independent director, and Paul J. Varello, an independent Sims director, met in London to discuss the possible transaction between Sims and Metal Management and the terms of a draft term sheet. Messrs. Dienst, Bobins, Sutcliffe and Varello believed they had made substantial progress on financial and governance issues and agreed to continue their discussions, with a view toward reaching agreement on a term sheet by June 14, 2007.

 

On June 7, 2007, Messrs. Sutcliffe and Dienst spoke by telephone about the structure and financial terms of the possible transaction, including a review of the potential cost synergies that could be obtained, but noted the difficulties in achieving a business combination of Metal Management and Sims’s North American operations, including those arising from Sims’s becoming a substantial stockholder in Metal Management as a result of the possible transaction. Mr. Sutcliffe informed Mr. Dienst that the Sims board would discuss the possible transaction at its next scheduled meeting on June 12, 2007.

 

On June 12, 2007, the Sims board of directors held a meeting. The Sims board of directors was then comprised of Mr. Mazoudier, as chairman, Mr. Sutcliffe, Mr. Varello, Geoffrey N. Brunsdon, Ross B. Cunningham, Robert L. Every, J. Michael Feeney, Masakatsu Iwanaga and Christopher J. Renwick. At the meeting, reference was made to a possible transaction involving Metal Management, but it was agreed to defer discussion until a subsequent meeting of the Sims board of directors to be held on June 15, 2007.

 

On June 15, 2007, the Sims board of directors held a meeting at which Mr. Sutcliffe updated the board on discussions with Metal Management concerning a possible transaction, and representatives of UBS reviewed various transaction structural alternatives with the Sims board. The board concluded that a transaction that involved Metal Management acquiring Sims’s North American metal recycling operations was not favored because a partial combination would be likely to involve a complex operational and governance structure and would result in Sims giving up full control over its North American operations. The Sims board determined, however, that a full merger should be explored further.

 

On a telephone call on June 16, 2007, Mr. Sutcliffe informed Mr. Dienst that the Sims board of directors had reviewed the possible transaction involving Metal Management and Sims’s North American assets. Mr. Sutcliffe indicated that the Sims board had concluded that the previously discussed transaction involving only its North American metal recycling operations did not accomplish Sims’s objectives. Mr. Sutcliffe accordingly suggested that a merger of Sims and Metal Management might present better opportunities for the two companies and their respective shareholders, and suggested that Sims and Metal Management consider a merger.

 

On June 18, 2007, Messrs. Dienst and Larry, representatives of CIBC World Markets, representatives of King & Spalding LLP, Metal Management’s legal counsel, Mr. Sutcliffe and representatives of UBS met to discuss Sims’s proposal for a merger, which at that time contemplated that the parent company following the merger would be determined according to the structure that would yield the greatest benefits for both sets of shareholders.

 

On June 19, 2007, Messrs. Dienst and Mazoudier further discussed by telephone a possible merger. On a conference call on June 21, 2007, Mr. Dienst informed the Metal Management board of directors of the Sims proposal for the merger. The Metal Management board of directors agreed that Metal Management should

engage in appropriate discussion and diligence to determine whether the company should pursue the transaction.

 

On June 22, 2007, Messrs. Dienst and Larry and representatives of King & Spalding and CIBC World Markets had a conference call with Mr. Sutcliffe and representatives of Baker & McKenzie LLP, Sims’s legal counsel, and UBS to discuss the relative financial contributions of the companies and review financial information relating to the companies.

 

On June 22, 2007, Messrs. Dienst and Sutcliffe discussed where the combined company after the merger would maintain its headquarters. They also discussed the diligence process, including environmental due diligence.

 

On June 27, 2007, representatives of King & Spalding, Minter Ellison, Australian legal counsel to Metal Management, and CIBC World Markets had a conference call with representatives of Baker & McKenzie, UBS and Ernst & Young LLP, tax advisor to Sims. During the conference call, tax structuring issues and the financial and tax due diligence process were discussed.

 

On or about July 2, 2007, at the direction of Metal Management and Sims, representatives of CIBC World Markets and UBS had a conference call regarding relative valuation of the companies with respect to the merger. Later that day, Messrs. Dienst and Sutcliffe concluded that the preferred transaction structure would be for Sims to be the surviving parent due to the tax inefficiencies and difficulty of implementation of a transaction involving Metal Management as the parent.

 

On a conference call on July 5, 2007, representatives of King & Spalding, Minter Ellison and CIBC World Markets discussed the possible timing of the merger and the companies’ due diligence process with representatives of Baker & McKenzie and UBS. These discussions also occurred on July 9, 2007.

 

Also on July 9, 2007, Messrs. Sutcliffe and Dienst discussed possible synergies, the possible premium to be reflected in the exchange ratio in connection with the merger and the due diligence process.

 

On July 10, 2007, representatives of Baker & McKenzie, GaiaTech, environmental consultants for Sims, King & Spalding and Metal Management participated in a conference call regarding environmental due diligence. Representatives of CIBC World Markets were also present on the call. Also on July 10, 2007, at the direction of Metal Management and Sims, representatives of CIBC World Markets and UBS discussed the type of financial information that would be necessary to evaluate the merger. Later that day, due to general concerns by both Sims and Metal Management that the due diligence that each party would need to conduct could result in potential leaks concerning the proposed merger, Metal Management and Sims agreed that no substantial due diligence (specifically including site visits) would occur until both companies had reached a general consensus on relative valuation.

 

On July 19, 2007, members of Sims’s Finance & Investment Committee, which is referred to as the F&I Committee, held a meeting. The F&I Committee was then comprised of Messrs. Brunsdon, Cunningham, Every, Renwick, Sutcliffe and Varello. At the meeting, the F&I Committee discussed issues pertaining to a possible merger, including the proposed transaction structure and future regulatory and compliance obligations, potential synergies, the headquarters and management of the combined company resulting from a merger, due diligence requirements and valuation considerations. Following the meeting, Mr. Sutcliffe sent Mr. Dienst correspondence updating him on discussions of the F&I Committee and raising the possibility of Sims delivering a letter and term sheet to Metal Management summarizing the terms of a possible merger.

 

On July 23, 2007, members of the F&I Committee held a meeting at which they further discussed issues pertaining to a possible merger, in particular concerning the composition and structure of the board of directors of the combined company resulting from a possible merger. Mr. Sutcliffe updated Mr. Dienst again on July 23, 2007 regarding the discussions by the F&I Committee.

 

On July 26, 2007, members of the F&I Committee held a meeting at which they and representatives of UBS discussed key transaction issues and valuation considerations. The F&I Committee resolved to recommend to the Sims board of directors proceeding with a possible merger on the basis of a maximum

premium of 12.5% to 15% to the one-week volume weighted average price of Metal Management’s shares and a maximum exchange ratio of 2.10 to 2.15.

 

Mr. Sutcliffe updated Mr. Dienst again on July 26, 2007 on discussions by members of the Sims board of directors. On July 26, 2007, Mr. Dienst updated Mr. Sutcliffe on discussions by the Metal Management board of directors.

 

On July 27, 2007, the Sims board of directors met to consider the terms of a draft letter and term sheet describing a non-binding proposal with respect to a possible merger. Following a discussion regarding the letter and term sheet, the Sims board of directors authorized Mr. Mazoudier to send the letter and term sheet on behalf of Sims to Mr. Dienst and the Metal Management board of directors.

 

Also on July 27, 2007, Mr. Dienst and the Metal Management board of directors received the letter and term sheet sent by Mr. Mazoudier. The Sims letter and term sheet proposed that the exchange ratio be calculated at a maximum implied premium of 12.5% to Metal Management’s share price (based upon an average of the five-day volume weighted prices and an average daily currency exchange rate prior to execution of a merger agreement), and a maximum exchange ratio of 2.10 Sims ADSs for each outstanding share of Metal Management common stock. The term sheet also had proposals regarding the location of executive headquarters (New York) and infrastructure (Chicago), senior management (with Mr. Dienst as chief executive officer, Mr. Larry as chief financial officer, Mr. Sutcliffe and Ross B. Cunningham, Sims’s chief financial officer, continuing as executive directors and a designee of Sims as chairman of the board), board composition (substantially as included in the merger agreement, except that the initial proposal was for four non-executive directors to be nominated by Sims) and deal protection provisions (referring generally to mutual “fiduciary outs” with customary termination fees).

 

At a Metal Management board meeting on July 29, 2007, Mr. Dienst updated the board on the negotiations with Sims’s management regarding the proposed merger. Representatives of King & Spalding discussed with the Metal Management board aspects of the proposal and term sheet, including a discussion of director fiduciary duties, and CIBC World Markets discussed with the Metal Management board financial aspects of the proposal. Mr. Dienst also discussed the strategic rationale for the transaction, including the following factors: the global nature of the combined entity; the expansion of Metal Management’s existing North American operations; the potential synergies that would result from the proposed merger; the geographic and segment diversification of the combined company’s operations; the balance between domestic and export markets; the potential to further capitalize on Sims’s strong global trading operations; the retention of qualified managers at the corporate and regional levels; and a global platform for future growth. The Metal Management board instructed Mr. Dienst to prepare and send to Sims a letter with Metal Management’s counter-proposal.

 

On July 30, 2007, Mr. Dienst and Gerald E. Morris, lead independent director of Metal Management, sent a letter to Mr. Mazoudier and the Sims board of directors with the Metal Management counter proposal to the Sims July 27, 2007 non-binding proposal. The Metal Management letter proposed that the exchange ratio be calculated using a minimum exchange ratio of 2.10 Sims ADSs for each outstanding share of Metal Management common stock and a maximum implied premium of 17.5% to Metal Management’s share price. The letter also suggested that the companies continue to try to reach an understanding on financial terms, board composition and other matters with respect to the proposed merger.

 

On July 31, 2007, Messrs. Dienst and Sutcliffe discussed the details of the proposed merger and each company’s position in the negotiations. At the direction of Metal Management and Sims, Metal Management’s and Sims’s respective financial advisors also had discussions on July 31, 2007 about, among other matters, the financial terms of the proposed transaction, including the possible exchange ratio and implied premium to Metal Management’s share price.

 

On or about August 1, 2007, representatives of UBS and CIBC World Markets participated in a conference call to discuss Metal Management’s latest proposal sent on July 30, 2007, in which representatives of UBS indicated that Sims was willing to calculate the exchange ratio using a maximum exchange ratio of 2.10 Sims ADSs for each outstanding share of Metal Management common stock, subject to a maximum

implied premium of 15% to Metal Management’s share price (based on the five-day volume weighted average trading prices at the time a merger agreement would be signed).

 

On August 2, 2007, the Metal Management board of directors held a telephonic meeting. During the board meeting, Mr. Dienst again updated the Metal Management board on the negotiations for the proposed merger. CIBC World Markets discussed with the board financial terms of the latest Sims proposal, including the exchange ratio, premium and implied pro forma ownership of the combined company. The board also discussed the potential strategic rationale for the merger, including the potential creation of shareholder value to Metal Management stockholders and whether to initiate due diligence with the ability to negotiate the terms of the deal after substantially completing due diligence or whether to negotiate the terms of the proposed merger before initiating the due diligence process. The Metal Management board of directors then discussed the parameters for a counter-proposal to Sims’s current proposal. While the Metal Management board acknowledged that no consensus with Sims had been reached regarding the appropriate relative valuation for the two companies, the Metal Management board’s view was that the Sims and Metal Management positions were reasonably close. The Metal Management board of directors then instructed Mr. Dienst to expand the due diligence efforts to determine if a transaction was feasible and to allow final valuation discussions to occur following the completion of due diligence.

 

On or around August 3, 2007, Mr. Sutcliffe sent an email to Mr. Dienst indicating that Sims would be prepared to proceed with discussions on the basis of an exchange ratio of approximately 2.15 or a premium of approximately 15%.

 

Between August 3, 2007 and September 23, 2007, Messrs. Dienst and Sutcliffe updated each other concerning the due diligence process and the positions of each company regarding the proposed merger.

 

During August 7 through August 10, 2007, Mr. Dienst and Alan D. Ratner, President of Metal Management Northeast, Inc., toured Sims’s facilities in Europe with members of Sims’s management.

 

On or about August 14, 2007, Metal Management and Sims agreed on a mutual due diligence request list, began to exchange documents and financial and other information and commenced more in-depth due diligence efforts. Due diligence, including site visits by environmental consultants, commenced promptly thereafter, and continued through to September 24, 2007.

 

On August 17, 2007, representatives of Baker & McKenzie sent representatives of King & Spalding an initial draft of a merger agreement for the proposed merger. From August 17, 2007 until September 24, 2007, representatives of King & Spalding and Baker & McKenzie negotiated the terms of the draft merger agreement.

 

During August 15 through August 18, 2007, Messrs. Dienst, Ratner and Larry toured Sims’s facilities in Australia with members of Sims’s management.

 

During August 19, 2007 through August 23, 2007, Mr. Sutcliffe toured Metal Management’s facilities in the United States with members of Metal Management’s senior management.

 

On August 29, 2007, Mr. Sutcliffe communicated with Mr. Dienst regarding the proposed dividend policy of the combined company after the proposed merger and a suggested timeline for the reelection and retirement of certain members of the board of directors of the combined company after the merger, which proposals were subsequently agreed on by both boards of directors.

 

On August 30, 2007, members of the F&I Committee held a meeting at which they discussed the progress of due diligence, listing and filing matters, financial parameters and other outstanding issues relating to the merger. Also on August 30, 2007, at the direction of Metal Management and Sims, their respective financial advisors further discussed, among other things, valuation matters.

 

On August 31, 2007, the Sims board of directors held a meeting. At the meeting, the board discussed and approved wording for the dividend policy of the combined company following the proposed merger. The board authorized Mr. Sutcliffe to convey the approved dividend policy to the Metal Management board of directors.

 

At meetings of the Metal Management board of directors on September 5 and September 6, 2007, Mr. Dienst and Mr. Larry provided updates on the due diligence process, representatives of King & Spalding led discussions of the directors’ fiduciary duties in the context of considering the proposed merger, summarized the key terms of the draft merger agreement, including the termination and termination fee provisions and also updated the board on diligence matters, and CIBC World Markets updated the board on financial aspects of the proposed merger. The board again discussed the strategic rationale for the merger, including the similarity of the assets of Sims and Metal Management, the potential synergies to be derived from the merger and the global footprint that the combined company would create. On September 6, some members of the board of directors of Sims and Metal Management met and discussed the proposed merger. The following day, those members toured several of Metal Management’s operating sites.

 

On or about September 5, 2007, Mr. Mazoudier informed Mr. Morris that Sims was close to reaching its aggregate cap for non-executive directors’ compensation and that Sims would need to seek shareholder approval to increase the cap at the next shareholders’ meeting to accommodate a larger board after the merger.

 

On September 9, 2007, a representative of Baker & McKenzie distributed a revised draft of the merger agreement to representatives of King & Spalding.

 

On September 12, 2007, Mr. Mazoudier sent Mr. Morris an email setting out the basis for non-executive directors’ fees, which are determined through a comparison of the fees of ASX companies with similar market capitalizations, and outlined Sims’s non-executive directors’ compensation structure, which does not include the grant of shares or options to non-executive directors. Mr. Mazoudier noted that Metal Management directors would be entitled to a higher cash base salary as non-executive directors of Sims Metal Management but that the loss of option grants could result in lower compensation overall.

 

On September 13, 2007. Mr. Mazoudier corresponded with Mr. Morris regarding whether there should be an increase in Mr. Dienst’s salary after the merger and the expectation of future share grants to Mr. Dienst, and noted issues regarding required shareholder approval of any future share grants.

 

On September 14, 2007, Mr. Morris updated the remaining members of the Metal Management board of directors about his discussions with Mr. Mazoudier.

 

On September 17, 2007, Mr. Mazoudier discussed separately with Messrs. Feeney and Varello, the members of the Sims Remuneration Committee, Mr. Dienst’s proposed compensation package, including short-term and long-term incentive plans, compensation package review, the vesting of the restricted stock grant and a sign-on bonus.

 

On September 18, 2007, Mr. Mazoudier sent Mr. Dienst an email proposing a continuation of Mr. Dienst’s current salary through June 30, 2009 (which would then be subject to review). The proposal also contemplated that Mr. Dienst would become eligible to participate in Sims’s short-term and long-term incentive plans for the year ending June 30, 2009 in lieu of the current Metal Management bonus plan and historical stock grant policy and would be entitled to receive a $1 million integration bonus upon achievement of synergies to be specified. The proposal also contemplated that Mr. Dienst’s existing restricted stock would vest upon closing of the merger but that he would agree to pay a cash clawback amount if he were not to continue to serve as the Sims Metal Management chief executive officer through July 26, 2010, with a lesser clawback amount if he were to leave before July 26, 2011 or July 26, 2012.

 

On September 18, 2007, the Metal Management board of directors (without Mr. Dienst participating) discussed Sims’s proposal regarding Mr. Dienst’s possible compensation as chief executive officer of the combined company after consummation of the merger, including whether it would be appropriate to accelerate vesting of his restricted stock that did not already automatically vest upon consummation of the merger. The board also determined that any discretionary restricted stock award to Mr. Dienst in respect of Metal Management’s fiscal 2008 performance would be increased by an amount of restricted stock with a value of $1 million in recognition of his extraordinary efforts with respect to the merger (but in no event to exceed a total grant of 75,000 shares). The board also agreed to modify its short-term bonus program upon completion of the merger to make the 2008 payments after completion of the audit of Sims Metal Management’s 2008 financial statements, but the bonus payments would be calculated as of March 31, 2008 at 125% of the amount

that the eligible employee would have received had such payment been made after completion of Metal Management’s 2008 financial statements, reflecting a 15 month period, except that, in respect of Messrs. Dienst and Larry, they would receive, prior to closing of the merger, the maximum percentage payable to them under the RONA Plan, plus an additional three months of annualized bonus compensation at the same percentage. The board also determined that it would create a potential discretionary bonus pool (for which Mr. Dienst would not be eligible) to compensate certain employees for their extraordinary efforts with respect to the merger.

 

On September 21, 2007, members of the F&I Committee held a meeting at which they discussed at length a draft merger proposal and resolved to recommend the proposal to the Sims board of directors for further consideration. Following the meeting of the F&I Committee, the Sims board of directors held a meeting at which the board discussed various outstanding issues pertaining to the merger. Representatives of UBS discussed valuation issues, the financial impact of the proposed merger on Sims and key market considerations regarding the proposed merger. Representatives of Baker & McKenzie discussed the progress of the legal and environmental due diligence process and provided a summary of the key terms of the draft merger agreement. The board agreed to instruct representatives of UBS to continue discussions with CIBC World Markets regarding the exchange ratio. Based on these instructions, an exchange ratio was proposed to Metal Management, of 2.00 Sims ADSs for each outstanding share of Metal Management common stock, which, due to significant movements in the Australian dollar — U.S. dollar exchange rate and the relative prices of Sims and Metal Management shares since July 2007, reflected at that time an implied premium of approximately 15% to Metal Management’s share price.

 

On September 21, 2007, Mr. Sutcliffe conveyed to Mr. Dienst the position of Sims’s board of directors that Mr. Dienst’s unvested shares must vest upon the closing of the merger and that any integration bonus would be payable in August 2009 upon completion of the combined company’s audit. Mr. Sutcliffe also conveyed the approval of the compensation terms outlined by Mr. Mazoudier regarding non-executive directors.

 

On the morning of September 23, 2007, the Metal Management board of directors held a meeting. At that meeting, representatives of King & Spalding provided an update on the merger agreement and again reviewed with the directors their fiduciary duties. CIBC World Markets provided an update on financial terms of the proposed merger. The Metal Management board of directors authorized Mr. Dienst and CIBC World Markets to propose an exchange ratio of 2.10 and indicated that the minimum exchange ratio that would be acceptable to the Metal Management board of directors was 2.05 Sims ADSs for each outstanding share of Metal Management common stock with a minimum pro forma equity ownership of 30% for Metal Management stockholders. After the Metal Management board meeting, and as instructed by the Metal Management board of directors, CIBC World Markets proposed on behalf of Metal Management to UBS an exchange ratio of 2.10 Sims ADSs for each outstanding share of Metal Management common stock. UBS representatives responded that a middle ground exchange ratio of between 2.00 and 2.10 might be acceptable to the Sims board of directors.

 

In the afternoon of September 23, 2007, the Metal Management board of directors met again. CIBC World Markets updated the board on its discussions with UBS. The Metal Management board of directors instructed CIBC World Markets to resume discussions regarding the exchange ratio.

 

Later that day, representatives of Metal Management’s financial advisor attempted to resume discussions with representatives of UBS in accordance with the directives of the Metal Management board of directors and were informed by UBS that the Sims board of directors would be meeting the next day to consider authorizing a 2.05 exchange ratio.

 

On September 23, 2007, Sims, through Mr. Sutcliffe, sent Messrs. Dienst and Larry letters that would revise their respective current employment agreements if the proposed merger was consummated.

 

On September 23 and September 24, 2007, representatives of King & Spalding and Baker & McKenzie finalized the terms of the merger agreement, subject to approval by the boards of directors of Sims and Metal Management.

 

On September 24, 2007, the Sims board of directors held a meeting. At the meeting, representatives of UBS provided the board with an update on the financial terms of the proposed merger and representatives of Baker & McKenzie reviewed with the board the terms of the proposed merger agreement. Following discussion and the consideration of a range of strategic and financial matters and risks and potential benefits, including the risks and potential benefits discussed under “— Sims’s Reasons for the Merger,” the Sims board of directors unanimously approved the merger based on an exchange ratio of 2.05 Sims ADSs for each outstanding share of Metal Management common stock and authorized the management of Sims to finalize and execute the merger agreement based on the terms presented to the board.

 

On the morning of September 24, 2007, the Metal Management board of directors held a telephonic meeting. Mr. Dienst updated the board of directors on negotiations with Sims and informed the board that the Sims board of directors approved the merger at an exchange ratio of 2.05. Representatives of King & Spalding reviewed the terms of the merger agreement. Also at this meeting, CIBC World Markets reviewed with the Metal Management board of directors its financial analysis of the exchange ratio and rendered to the Metal Management board of directors an oral opinion, which was confirmed by delivery of a written opinion, dated September 24, 2007, as to the fairness, from a financial point of view, of the exchange ratio provided for in the merger. The Metal Management board of directors unanimously approved the merger agreement.

 

Metal Management’s Reasons for the Merger and Recommendation of its Board of Directors

 

By unanimous vote, the Metal Management board of directors, at a meeting held on September 24, 2007, determined that the merger agreement and the transactions contemplated by the merger agreement were advisable and in the best interests of the Metal Management stockholders and approved the merger agreement and the transactions contemplated thereby, including the merger. The Metal Management board of directors unanimously recommends that the Metal Management stockholders vote “FOR” adoption of the merger agreement and the transactions contemplated by the merger agreement at the Metal Management special meeting.

 

In evaluating the merger, the Metal Management board of directors consulted with Metal Management’s management and legal and financial advisors and considered a variety of factors, including the material factors described below. In light of the number and wide variety of factors considered in connection with its evaluation of the transaction, the Metal Management board of directors did not consider it practicable to, and did not attempt to, quantify or otherwise assign relative weights to the specific factors that it considered in reaching its determination. The Metal Management board of directors viewed its position as being based on all of the information available and the factors presented to and considered by it. In addition, individual directors may have given different weights to different factors. This explanation of Metal Management’s reasons for the proposed merger and all other information presented in this section is forward-looking in nature and, therefore, should be read in light of the facts discussed under “Cautionary Statements Regarding Forward-Looking Information.”

 

Strategic Considerations

 

The Metal Management board of directors considered a number of factors pertaining to the strategic rationale for the merger as generally supporting its decision to enter into the merger agreement, including the following:

 

 

 

 

 

Financial Considerations

 

The Metal Management board of directors also considered a number of financial factors pertaining to the merger as generally supporting its decision to enter into the merger agreement, including the following:

 

 

 

 

 

 

 

 

 

Other Considerations with Respect to the Merger

 

The Metal Management board of directors also considered a number of additional factors as generally supporting its decision to enter into the merger agreement, including the following:

 

 

 

 

Risks

 

The Metal Management board of directors also identified and considered a number of uncertainties, risks and other potentially negative factors, including the following:

 

 

 

 

 

 

 

 

 

 

 

 

The Metal Management board of directors weighed the potential benefits, advantages and opportunities of a merger and the risk of not pursuing a transaction with Sims against the risks and challenges inherent in the proposed merger. The Metal Management board of directors realized that there can be no assurance about future results, including results expected or considered in the factors listed above. However, the Metal Management board of directors concluded that the potential benefits outweighed the risks for consummating the merger with Sims.

 

After taking into account these and other factors, the Metal Management board of directors unanimously determined that the merger agreement and the transactions contemplated by the merger agreement were advisable and in the best interests of the Metal Management stockholders, approved the merger with Sims and the other transactions contemplated by the merger agreement, and approved the merger agreement.

 

Opinion of Metal Management’s Financial Advisor

 

Metal Management has engaged CIBC World Markets as its financial advisor in connection with the merger. In connection with this engagement, the Metal Management board of directors requested that CIBC World Markets evaluate the fairness, from a financial point of view, to the holders of Metal Management common stock of the exchange ratio provided for in the merger. On September 24, 2007, at a meeting of the Metal Management board of directors held to evaluate the merger, CIBC World Markets rendered to the Metal Management board of directors an oral opinion, which was confirmed by delivery of a written opinion, dated September 24, 2007, to the effect that, as of that date and based on and subject to the matters described in its opinion, the exchange ratio was fair, from a financial point of view, to the holders of Metal Management common stock.

 

The full text of CIBC World Markets’ written opinion, dated September 24, 2007, which describes the assumptions made, procedures followed, matters considered and limitations on the review undertaken, is attached to this proxy statement/prospectus as Appendix B. CIBC World Markets’ opinion was provided to the Metal Management board of directors in connection with its evaluation of the exchange ratio from a financial point of view. CIBC World Markets’ opinion does not address any other aspect of the merger and does not constitute a recommendation to any stockholder as to how such stockholder should vote or act with respect to any matters relating to the merger. The summary of CIBC World Markets’ opinion described below is qualified in its entirety by reference to the full text of its opinion. Holders of Metal Management common stock are encouraged to read the opinion carefully in its entirety.

 

In arriving at its opinion, CIBC World Markets:

 

 

 

In rendering its opinion, CIBC World Markets relied upon and assumed, without independent verification or investigation, the accuracy and completeness of all of the financial and other information provided to or discussed with CIBC World Markets by Metal Management and Sims and their respective employees, representatives and affiliates or otherwise reviewed by CIBC World Markets. CIBC World Markets was not provided with any financial forecasts and estimates relating to Sims prepared by Sims’s management and, accordingly, CIBC World Markets did not undertake an analysis of the financial performance of Sims beyond June 30, 2007. In addition, CIBC World Markets was advised that financial forecasts and estimates relating to Metal Management for periods beyond March 31, 2008 were not prepared by the management of Metal Management and, accordingly, CIBC World Markets did not undertake an analysis of Metal Management’s financial performance beyond March 31, 2008. With respect to the financial forecasts and estimates provided to CIBC World Markets relating to Metal Management, CIBC World Markets assumed, at the direction of the management of Metal Management and with Metal Management’s consent, without independent verification or investigation, that such forecasts and estimates were reasonably prepared on bases reflecting the best available information, estimates and judgments of the management of Metal Management as to Metal Management’s future financial condition and operating results. With respect to adjusted historical financial data relating to Metal Management and Sims provided to CIBC World Markets by the respective managements of Metal Management and Sims and estimates as to the potential cost savings anticipated by the managements of Metal Management and Sims to result from the merger, CIBC World Markets assumed, at the direction of the respective managements of Metal Management and Sims and with Metal Management’s consent, without independent verification or investigation, that such data and estimates were reasonably prepared on bases reflecting the best available information, estimates and judgments of the managements of Metal Management and Sims as to the matters covered by such data and estimates. CIBC World Markets assumed, with Metal

Management’s consent, that the financial results reflected in such forecasts and estimates, including estimates as to the potential cost savings and synergies anticipated to result from the merger, would be achieved at the times and in the amounts projected. CIBC World Markets relied, without independent verification, upon the assessments of the management of Metal Management as to market trends and prospects for the metal recycling industry and the potential impact of such trends and prospects on Metal Management and Sims. CIBC World Markets also relied, at Metal Management’s direction, without independent verification or investigation, on the assessments of the management of Metal Management as to the ability to integrate the businesses of Metal Management and Sims and to retain key customers of Metal Management and Sims.

 

CIBC World Markets assumed, with Metal Management’s consent, that the merger would qualify for federal income tax purposes as a reorganization under Section 368(a) of the Code. CIBC World Markets also assumed, with Metal Management’s consent, that the merger would be consummated in accordance with its terms without waiver, modification or amendment of any material term, condition or agreement and in compliance with all applicable laws and other requirements and that, in the course of obtaining the necessary regulatory or third party approvals and consents with respect to the merger, no delay, limitation, restriction or condition would be imposed that would have an adverse effect on Metal Management, Sims or the merger, including the contemplated benefits of the merger. CIBC World Markets neither made nor obtained any independent evaluations or appraisals of the assets or liabilities, contingent or otherwise, of Metal Management or Sims. CIBC World Markets’ opinion related to the relative values of Metal Management and Sims. CIBC World Markets did not express any opinion as to the underlying valuation, future performance or long-term viability of Metal Management or Sims, or the prices at which Metal Management common stock, Sims ordinary shares or Sims ADSs would trade at any time. CIBC World Markets expressed no view as to, and its opinion did not address, any terms or other aspects of the merger (other than the exchange ratio to the extent expressly specified in its opinion) or any aspect or implication of any other agreement, arrangement or understanding entered into in connection with the merger or otherwise. In addition, CIBC World Markets expressed no view as to, and its opinion did not address, Metal Management’s underlying business decision to proceed with or effect the merger nor did its opinion address the relative merits of the merger as compared to any alternative business strategies that might exist for Metal Management or the effect of any other transaction in which Metal Management might engage. In connection with its engagement, CIBC World Markets was not requested to, and it did not, solicit third party indications of interest in the possible acquisition of all or a part of Metal Management. CIBC World Markets’ opinion was necessarily based on the information available to it and general economic, financial and stock market conditions and circumstances as they existed and could be evaluated by CIBC World Markets on the date of its opinion. It should be understood that, although subsequent developments may affect CIBC World Markets’ opinion, CIBC World Markets does not have any obligation to update, revise or reaffirm its opinion. Except as described above, Metal Management imposed no other instructions or limitations on CIBC World Markets with respect to the investigations made or the procedures followed by it in rendering its opinion.

 

This summary is not a complete description of CIBC World Markets’ opinion or the financial analyses performed and factors considered by CIBC World Markets in connection with its opinion. The preparation of a financial opinion is a complex analytical process involving various determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances and, therefore, a financial opinion is not readily susceptible to summary description. CIBC World Markets arrived at its ultimate opinion based on the results of all analyses undertaken by it and assessed as a whole, and did not draw, in isolation, conclusions from or with regard to any one factor or method of analysis for purposes of its opinion. Accordingly, CIBC World Markets believes that its analyses and this summary must be considered as a whole and that selecting portions of its analyses and factors or focusing on information presented in tabular format, without considering all analyses and factors or the narrative description of the analyses, could create a misleading or incomplete view of the processes underlying CIBC World Markets’ analyses and opinion.

 

In performing its analyses, CIBC World Markets considered industry performance, general business, economic, market and financial conditions and other matters existing as of the date of its opinion, many of which are beyond the control of Metal Management and Sims. No company, business or transaction used in

the analyses is identical or directly comparable to Metal Management, Sims or the merger, and an evaluation of the results of those analyses is not entirely mathematical. Rather, the analyses involve complex considerations and judgments concerning financial and operating characteristics and other factors that could affect the acquisition, public trading or other values of the companies, business segments or transactions analyzed.

 

The forecasts and estimates contained in CIBC World Markets’ analyses and the ranges of valuations resulting from any particular analysis are not necessarily indicative of actual values or future results, which may be significantly more or less favorable than those suggested by its analyses. In addition, analyses relating to the value of businesses or securities do not purport to be appraisals or to reflect the prices at which businesses or securities actually may be sold. Accordingly, the forecasts and estimates used in, and the results derived from, CIBC World Markets’ analyses are inherently subject to substantial uncertainty.

 

The type and amount of consideration payable in the merger were determined through negotiation between Metal Management and Sims, and the decision to enter into the merger was solely that of the Metal Management board of directors. CIBC World Markets’ opinion and financial presentation were only one of many factors considered by the Metal Management board of directors in its evaluation of the merger and should not be viewed as determinative of the views of the Metal Management board of directors or management with respect to the merger or the exchange ratio provided for in the merger.

 

The following is a summary of the material financial analyses reviewed with the Metal Management board of directors in connection with CIBC World Markets’ opinion dated September 24, 2007. The financial analyses summarized below include information presented in tabular format. In order to fully understand CIBC World Markets’ financial analyses, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses. Considering the data in the tables below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of CIBC World Markets’ financial analyses.

 

Selected Companies Analysis

 

CIBC World Markets performed separate selected companies’ analyses of Metal Management and Sims in which CIBC World Markets reviewed financial and stock market information of selected publicly held companies in the metal recycling industry. Financial data of the selected companies were based on public filings, publicly available research analysts’ estimates and other publicly available information. Estimated financial data of Metal Management were based on internal estimates of the management of Metal Management and historical financial data of Metal Management and Sims were provided by the respective managements of Metal Management and Sims. Latest 12 months financial data of Metal Management, Sims and the selected companies were for the 12-month period ended June 30, 2007.

 

Metal Management.  CIBC World Markets reviewed financial and stock market information of Metal Management and the following four selected publicly held companies. These companies, referred to as the Metal Management selected companies, were selected primarily because they are publicly traded companies in the metals industry which engage in scrap metal recycling, which is the business in which Metal Management operates:

 

 

CIBC World Markets reviewed enterprise values of the Metal Management selected companies, calculated as fully-diluted market value based on closing stock prices on September 21, 2007, plus net debt, as a multiple of latest 12 months earnings before interest, taxes, depreciation and amortization, which is referred to as EBITDA, and calendar year 2007 estimated EBITDA. CIBC World Markets also reviewed closing stock prices

of the Metal Management selected companies on September 21, 2007 as a multiple of latest 12 months earnings per share, which is referred to as EPS, and calendar year 2007 estimated EPS.

 

Sims.  CIBC World Markets reviewed financial and stock market information of Sims and the following seven selected publicly held companies. These companies, referred to as the Sims selected companies, were selected primarily because they are publicly traded companies in the metals industry which engage in scrap metal recycling (which is the principal business in which Sims operates) or, given that Sims also engages in other types of metal recycling and has operations that are directly affected by commodity iron ore prices, publicly traded companies in the metals industry engaged in other types of metal recycling or in iron ore mining which, in CIBC World Markets’ view, were deemed relevant for purposes of comparison:

 

 

CIBC World Markets reviewed enterprise values of the Sims selected companies as a multiple of latest 12 months EBITDA. CIBC World Markets also reviewed closing stock prices of the Sims selected companies on September 21, 2007 as a multiple of latest 12 months EPS.

 

Based on the implied per share equity reference ranges for Metal Management and Sims calculated by applying a range of selected multiples of the above-referenced metrics derived from the Metal Management selected companies and the Sims selected companies to corresponding data, as adjusted to reflect certain acquisitions and non-recurring items, of Metal Management and Sims, this analysis indicated the following implied exchange ratio reference range, as compared to the exchange ratio provided for in the merger:

 

 

Selected Precedent Transactions Analysis

 

CIBC World Markets reviewed the transaction values of the following six selected transactions involving companies in the metal recycling industry:

 

 

CIBC World Markets reviewed transaction values in the selected transactions, calculated as the equity value implied for the target company based on the consideration payable in the selected transaction, plus net debt, as a multiple of latest 12 months EBITDA. Financial data for the selected transactions were based on publicly available information at the time of announcement of the relevant transaction. Financial data of Metal Management were provided by the management of Metal Management. Based on the implied per share equity reference range for Metal Management calculated by applying a range of selected multiples of latest 12 months EBITDA derived from the selected transactions to Metal Management’s latest 12 months (as of June 30, 2007) EBITDA, as adjusted to reflect certain acquisitions and non-recurring items, and on the implied per

share equity reference range derived for Sims from the selected companies analysis described above, this analysis indicated the following implied exchange ratio reference range, as compared to the exchange ratio provided for in the merger:

 

 

Premiums Paid Analysis

 

CIBC World Markets reviewed the premiums paid in 24 selected all-stock transactions announced between January 1, 2005 and September 21, 2007 in which the pro forma equity ownership of the target company’s shareholders upon consummation of the transaction ranged between 20% and 50% relative to the closing stock prices of the target companies in such transactions one trading day, one week and four weeks prior to public announcement of the relevant transaction. Based on the implied per share equity reference range for Metal Management calculated by applying a range of selected premiums derived from the selected transactions to the closing prices of Metal Management common stock one trading day, one week and four weeks prior to September 21, 2007 and on the closing price of Sims ordinary shares on September 21, 2007, this analysis indicated the following implied exchange ratio reference range, as compared to the exchange ratio provided for in the merger:

 

 

Contribution Analysis

 

CIBC World Markets reviewed the relative contributions of Metal Management and Sims to the combined company’s latest 12 months (as of June 30, 2007) net income, as adjusted to reflect certain acquisitions and non-recurring items. Financial data of Metal Management and Sims were provided by the respective managements of Metal Management and Sims. Based on the implied equity ownership percentage of Metal Management’s stockholders in the combined company derived from the relative contributions of Metal Management and Sims to the latest 12 months net income of the combined company, this analysis indicated the following implied exchange ratio reference range, as compared to the exchange ratio provided for in the merger:

 

 

Miscellaneous

 

Metal Management has agreed to pay CIBC World Markets for its financial advisory services in connection with the merger an aggregate fee estimated to be approximately $8.8 million, a portion of which was payable in connection with CIBC World Markets’ engagement, a portion of which was payable upon delivery of its opinion and approximately $8 million of which is contingent upon consummation of the merger. In addition, Metal Management has agreed to reimburse CIBC World Markets for its reasonable expenses, including reasonable fees and expenses of its legal counsel, and to indemnify CIBC World Markets and related parties against liabilities, including liabilities under the federal securities laws, relating to, or arising out of, its engagement. In the ordinary course of business, CIBC World Markets and its affiliates may actively trade the securities of Metal Management and Sims for its and their own accounts and for the accounts of customers and, accordingly, may at any time hold a long or short position in such securities.

 

Metal Management selected CIBC World Markets as its financial advisor based on CIBC World Markets’ reputation and experience. CIBC World Markets is an internationally recognized investment banking firm and, as a part of its investment banking business, is regularly engaged in valuations of businesses and securities in

connection with acquisitions and mergers, underwritings, secondary distributions of securities, private placements and valuations for other purposes.

 

Sims’s Reasons for the Merger

 

The Sims board of directors, at a meeting held on September 24, 2007, unanimously determined that the merger agreement and the transactions contemplated by the merger agreement were advisable and in the best interests of the shareholders of Sims and approved the merger agreement and the transactions contemplated thereby, including the merger.

 

In reaching this decision, the Sims board of directors considered a range of strategic and financial considerations, including:

 

 

The Sims board of directors also considered a range of risks and other issues, including:

 

 

 

The Sims board of directors weighed the potential benefits, advantages and opportunities of a merger and the risk of not pursuing a transaction with Metal Management against the risks and challenges inherent in the proposed merger. The Sims board of directors realized that there can be no assurance about future results, including results expected or considered in the factors listed above. However, the Sims board of directors concluded that the potential benefits outweighed the risks for consummating the merger with Metal Management.

 

After taking into account these and other factors, the Sims board of directors unanimously determined that the merger agreement and the transactions contemplated by the merger agreement were advisable and in the best interest of the shareholders of Sims, approved the merger with Metal Management and the other transactions contemplated by the merger agreement, and approved the merger agreement.

 

Interests of Metal Management Directors and Executive Officers in the Merger

 

Certain members of the Metal Management board of directors and executive officers of Metal Management, in their capacities as such, have certain interests in the merger that are in addition to or different from their interests as Metal Management stockholders generally. See “The Merger — Effect of Merger on Metal Management Executive Employment Agreements and Severance Arrangements,” “The Merger — Effect of Merger on Equity Awards” and “The Merger — Indemnification and Directors’ and Officers’ Insurance.” The Metal Management board of directors was aware of these interests and considered them, among other matters, in approving the merger agreement and the transactions contemplated thereby.

 

Board of Directors of Sims Metal Management After the Merger

 

Board of Directors

 

Upon completion of the merger, the Sims Metal Management board of directors will consist of 12 directors. The Sims Metal Management board of directors will consist of seven current Sims directors and the five current Metal Management directors. Paul K. Mazoudier will be the chairman of the board of Sims Metal Management.

 

 

If any of the foregoing persons is unavailable for any reason to serve as a director of Sims Metal Management upon the effective date of the merger, the board of directors of Sims or Metal Management, as applicable, will be entitled to designate another person to serve on the board of directors of Sims Metal Management.

 

Under the merger agreement, Sims Metal Management directors will serve three-year terms and be eligible for reelection to further three-year terms. Three of the four former Metal Management non-executive directors will stand for reelection at the 2008 annual general meeting of Sims Metal Management shareholders. The fourth former Metal Management non-executive director, who has not yet been identified, will not stand for reelection and will retire and, therefore, will no longer be a Sims Metal Management director after Sims Metal Management’s 2008 annual general meeting of shareholders.

 

If any of the former Metal Management non-executive directors vacates his directorship prior to the 2008 annual general meeting of shareholders, whether due to removal, resignation or death, the former Metal Management directors will have the exclusive authority to nominate individuals to fill such vacant seats, as long as the nominees are reasonably acceptable to the Nomination Committee of the Sims Metal Management board of directors.

Board Committees

 

Following completion of the merger, the board of directors of Sims Metal Management will have six committees; the Safety, Health, Environment & Community Committee, the Risk & Audit Committee, the Remuneration Committee, the Finance & Investment Committee, the Nomination Committee and the Integration Committee. The composition of each Committee will be determined in accordance with the merger agreement on or prior to the date of the completion of the merger, subject to the ASX Corporate Governance Council’s Principles of Good Corporate Governance and Best Practice Recommendations, which are referred to as the ASX corporate governance guidelines.

 

Director Compensation

 

Upon completion of the merger, the non-executive directors of Sims Metal Management (other than the chairman of the board) will each receive total annual compensation of A$170,610, excluding any fees received for holding the position of a board committee chair. The chair of the Risk & Audit Committee will receive an annual retainer of A$60,000. The chairs of the Safety, Health, Environment & Community Committee, Remuneration Committee, Finance & Investment Committee and the Integration Committee will each receive an annual retainer of A$30,000. No annual retainer will be paid to the chair of the Nomination Committee. The chairman of the board of Sims Metal Management will receive A$393,800. No board or committee meeting fees are paid. Subject to the Corporations Act, Sims Metal Management’s constitution and listing rules of the ASX and subject to shareholder approval to the extent that annual compensation to non-executive directors would exceed A$2,500,000 in aggregate, the board of directors of Sims Metal Management will have the authority to modify the compensation paid to board and committee members.

 

Executive Officers of Sims Metal Management After the Merger

 

The following executive officers of Sims and Metal Management are expected to serve as executive officers of Sims Metal Management following the merger: