KKR in £1.3bn swoop on Smart Metering Systems
Glasgow meter installer Smart Metering Systems is being acquired in a £1.3 billion deal by US private equity firm Kohlberg Kravis Roberts.
The 955p a share offer represents a 40.4% premium to last night’s closing price of 680p and is being recommended by the SMS board.
The deal implies an enterprise value (equity and debt) of approximately £1.4 billion. The shares soared by 41.2%, or 280p, to 960p at the close.
SMS shareholders will be entitled to receive and retain the Second FY 2023 dividend Instalment of 8.31875 pence per SMS Share as announced by SMS on 12 September 2023, which is expected to be paid on 25 January 2024 to those SMS shareholders who appear on the register of members of the Company on 5 January 2024.
KKR believes that SMS is a business of high quality, with a strong and highly experienced management team and with the potential to substantially contribute to and enable the energy transition.
The business has an established smart meters platform with growing presence in grid-scale battery storage assets and the potential to further scale carbon reduction assets, and play a leading role to support the UK Government’s ambition to be net zero by 2050.
Tim Mortlock, SMS chief executive, and Gail Blain, chief financial officer, are expected to continue as SMS directors.
SMS, which employs about 1,500 staff, installs, owns and manages smart meters on behalf of energy companies, housebuilders, retailers and social housing providers. It also develops and operates battery energy systems to store clean energy as Britain aims to quadruple its storage capacity by 2030.
However, it said the delivery of its existing pipeline of 1.95 million smart meters would be “subject to commercial and market risks” and that it may struggle to raise new investment for more installations from public markets.
It added that its share price did not reflect the strength of its trading performance and its future growth prospects and that the deal was attractive, given “the current equity market environment”.
“The constraints imposed by the public capital markets place the company at a competitive disadvantage when compared to comparable businesses,” it said in a statement.
“In light of the valuation of SMS’s listed shares, raising significant capital from the public market to enable the group to fulfil its growth potential beyond the existing pipeline would likely be challenging and dilutive to shareholder value.”