LONDON, UK: Kohlberg Kravis Roberts & Co. L.P. (KKR), through a newly formed Sienna Bidco, reached agreement on the terms of a recommended all cash acquisition of Smart Metering Systems plc (SMS) at the rate of 955 pence in cash per share valuing SMS at £1.3 billion on a fully diluted basis, and this implies an enterprise value of approximately £1.4 billion.

The acquisition price represents an attractive premium of approximately 40.4 per cent. to the closing price of 680 pence per SMS share on 6 December 2023.

Kohlberg Kravis Roberts & Co. (KKR) believes that Smart Metering Systems plc (SMS) is a business of high quality, with a best-in-class management team and long-term, contracted and inflation-protected cashflow streams.

The business has the potential to substantially contribute to and enable the energy transition. SMS represents an established smart meters platform with a growing capability in grid-scale battery storage assets and other carbon reduction activities, and is expected to play a leading role to support the UK Government’s ambition to be net zero by 2050.

The SMS Group has a large and attractive pipeline of broader opportunities including the ongoing Battery Energy Storage Systems (BESS) rollout, together with the development of wider carbon reduction (CaRe) products.

The size of these opportunities and the capital that would be required to maximise the return on those opportunities is substantial.

The SMS Group may not be able to fully capitalise on these opportunities with internally-generated cash flows, additional debt facilities or asset recycling alone.

A private setting will enable SMS to operate in a way which is not capital constrained, and which facilitates the investment needed to fully realise the growth opportunity presented by the UK’s energy transition.

KKR’s operational capability, partnership approach and extensive experience with investing behind the energy transition will enable it to be a strong partner to SMS as it progresses through its next phase of development, particularly in terms of flexible access to long term competitive capital.

Tim Mortlock, Chief Executive Officer of SMS, said: “KKR’s offer recognises the strength and resilience of our model and will ensure SMS has the necessary capital to accelerate and unlock its full growth potential. The offer price represents a significant premium to the current share price and allows shareholders to realise immediate and attractive value for their shareholding.”

Tara Davies, Partner and Co-Head of European Infrastructure at KKR, said: “SMS has a strong asset base and a clear strategy across different business lines which are critical enablers of the UK’s Net Zero goals, and we share the team’s vision of putting SMS at the heart of the UK’s energy transition.

Achieving this growth opportunity requires significant capital of a scale, flexibility and certainty which is best facilitated in the private markets.

KKR is a major investor in UK infrastructure and behind the energy transition, and we will bring our expertise and operational resources to bear in supporting SMS to invest at the level required and successfully scale its business over the long-term.”

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