The Sims Limited (ASX: SGM) share price is higher on Tuesday following an update released after market close yesterday.
At the time of writing, the stock is up 3.06% to $21.25, taking its gains to around 18% so far in 2026. The move comes as investors digest changes to the company's US operations.
By comparison, the S&P/ASX 200 Index (ASX: XJO) is up 2.2% this year.
Here's what was announced.
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What Sims is buying
In a statement to the ASX, Sims has agreed to acquire the assets of Tri-Coastal Trading, a Houston-based ferrous scrap processor, for US$65.5 million.
TCT processes more than 350,000 tonnes of scrap annually and operates a deep-water dock facility in the Houston Ship Channel. That access is a key feature of the deal, giving Sims direct exposure to export pricing while maintaining access to domestic markets.
Management expects the acquisition to deliver an EBITDA multiple of less than 4 times and a return on invested capital above 20% after synergies. The transaction is also expected to contribute more than US$25 million in EBITDA once fully integrated, assuming current pricing conditions.
How the deal is being funded
At the same time, Sims has entered into an agreement to sell its Mayo Shell property in Houston, a surplus non-operating site.
Proceeds from the sale are expected to exceed US$100 million over time and will substantially fund the Tri-Coastal acquisition. Management expects the initial sale to close in the coming months, with additional land parcels potentially taking up to 18 months to divest.
Why margins should improve
The deal allows Sims to consolidate its Houston ferrous operations into a single, lower-cost hub.
Management highlighted several benefits, including reduced logistics costs, elimination of duplicated overheads, and improved sourcing efficiency. The deep-water access removes the need for costly dock arrangements and expands Sims' ability to serve international customers directly.
The company also noted that the consolidation removes the need for significant capital expenditure at the existing Mayo Shell site, further improving capital efficiency.
Foolish bottom line
The deal strengthens the company's position in an important US scrap market and should help improve margins. Most of the funding comes from selling assets rather than taking on new debt or issuing shares, which reduces risk.
It also gives the business greater exposure to export prices, which are usually higher than domestic scrap prices and can help steady earnings over time.
Overall, the Houston changes should simplify the business, improve capital returns, and free up cash from non-core assets.
