Signature Group Holdings Inc. intends to sell subscription rights to existing shareholders so they can purchase new shares, raising up to $55 million for an acquisition.

The Sherman Oaks investment firm will use the proceeds to help fund its planned acquisition of Global Recycling and Specification Alloys, an aluminum recycling business unit of Aleris Corp. in Cleveland. After the acquisition, Signature plans to rename the operation Real Alloy Holdings Inc.

Holders of Signature common stock will receive one subscription right for each share of common stock owned at market close on Jan. 28. Each subscription right will entitle the holder to purchase a fraction of one share of new Signature common stock. The exact fraction value, as well as the price, will be determined by a formula to enable the company to raise $55 million in the offering.

The formula for the price will give the holders at least a 25 percent discount to the average price of Signature's common stock for the period Jan. 12 to Jan. 26, but in no case greater than $6.50 a share. The rights are “attached” to the Signature common stock and cannot be sold separately.

Signature agreed to buy the aluminum recycler for $525 million. It has already held a secondary stock offering for $28.5 million and issued senior notes for $305 million to fund the acquisition. It also sold its only functioning subsidiary, North American Breaker Co. LLC in Burbank, for $78 million, with the proceeds going toward the purchase.

Shares closed down 63 cents or 8 percent to $7.18 in over-the-counter trading.