Schnitzer, Hugo Neu Separating Scrap Joint Ventures

Schnitzer Steel Industries, Inc. and Hugo Neu Corp. have entered into a Master Agreement that provides for the separation and termination of various joint venture relationships. With the objective of providing an equitable division of the various joint venture operations, Hugo Neu will assume total ownership of the joint venture operations in New York, New Jersey and California, including the scrap processing facilities, marine terminals and related ancillary satellite sites, while Schnitzer will take over the joint ventures' various New England operations in Massachusetts, New Hampshire, Rhode Island and Maine, as well as acquire 100 percent ownership of the Hawaii operations of a Hugo Neu subsidiary and receive a payment of cash.

Pursuant to the Master Agreement:

-- A subsidiary of Schnitzer will acquire the 50 percent interests in various scrap metal joint ventures based in New England that are owned by a Hugo Neu subsidiary with the result that these joint ventures will become wholly-owned by a subsidiary of Schnitzer;

-- Subsidiaries of Hugo Neu will acquire Schnitzer's 50 percent interests in various joint ventures based in New Jersey, New York and California with the result that these joint ventures will become wholly-owned by subsidiaries of HNC;

-- Hugo Neu Schnitzer Global Trade LLC, a joint venture engaged primarily in scrap metal trading, will be split, with HNS Global Trade redeeming Schnitzer's 50 percent membership interest in it in exchange for the assets and liabilities of HNS Global Trade's trading business in Russia, Poland, Denmark, Finland, Norway and Sweden;

-- A subsidiary of Schnitzer will acquire Hugo Neu's wholly-owned scrap metal and green waste recycling business in Hawaii;

-- A subsidiary of Hugo Neu will pay a subsidiary of Schnitzer about $52 million in cash at closing;

-- Schnitzer and Hugo Neu and certain of their affiliates will enter into a number of related agreements governing, among other things, employee transitional issues, benefit plans, scrap sales and other transitional services; and

In order to provide for an equitable division of joint venture assets and liabilities, the companies evaluated and divided the business primarily using historical earnings trends.

According to a spokesman for Hugo Neu, one of the reasons for the split is the two companies had "different visions" of where the joint venture operations should be headed. The spokesman said that Hugo Neu was interested in getting more involved in the post consumer recycling side of the business, while Schnitzer was more comfortable on the industrial and commercial recycling side of the business.

For example, last year Hugo Neu inked a long-term contract with New York City to process all the city's residentially collected recyclables, including plastics and glass.

The Master Agreement has been approved by the Board of Directors of each of Schnitzer Steel and Hugo Neu and the transactions contemplated by the Master Agreement are subject to a number of conditions, including obtaining certain third party consents, permit amendments or transfers, Hugo Neu obtaining financing sufficient to fund the cash payment to be made to Schnitzer and the repayment of certain existing indebtedness, and other customary closing conditions. With respect to the financing contingency, Hugo Neu has confirmed to Schnitzer that it has entered into a definitive credit agreement sufficient to provide the required financing, subject to customary closing conditions. The parties currently expect that the closing of the transaction will occur in the third calendar quarter of 2005.