KKR to take over Smart Metering Systems for £1.3bn

February 2024 | DEALFRONT | PRIVATE EQUITY & VENTURE CAPITAL

Financier Worldwide Magazine

February 2024 Issue

In a move designed to bolster renewable energy in the UK, US global investment firm KKR & Co. Inc. is to acquire UK energy investment company Smart Metering Systems (SMS) in a transaction valued at £1.3bn.

Under the terms of the acquisition, each SMS shareholder will receive 955 pence in cash for each SMS share. The price is a 40.4 percent premium to the closing price of 680 pence per SMS share on 6 December 2023 – the last business day prior to the commencement of the offer period. KKR believes that SMS, under private ownership, will be able to accelerate its growth and continued transition from a metering provider and grid-scale battery storage operator to a fully integrated, end-to-end energy infrastructure company which owns, installs and manages carbon reduction assets.

Moreover, 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.

With significant experience and deep roots in infrastructure investing, KKR established its global infrastructure strategy in 2008 and has since been one of the most active infrastructure investors around the world, with a team of over 115 individuals, including more than 90 investment professionals and over 25 additional value-creation executives.

“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,” said Tara Davies, partner and co-head of European infrastructure at KKR. “Achieving this growth opportunity requires significant capital of a scale, flexibility and certainty which is best facilitated in the private markets.”

Established in 1995, Glasgow-headquartered SMS provides a full end-to-end service in metering and other carbon reduction assets, from funding and installation to management and maintenance, with a highly skilled workforce, deep engineering expertise and well-established industrial partnerships.

The SMS group has a large and attractive pipeline of broader opportunities including the ongoing battery energy storage systems rollout, together with the development of wider carbon reduction products. The size of these opportunities and the capital that would be required to maximise the return on those opportunities is substantial.

“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,” said Tim Mortlock, chief executive of SMS. “The offer price represents a significant premium to the current share price and allows shareholders to realise immediate and attractive value for their shareholding.”

In order to become effective, the acquisition – which is expected to complete in the first quarter of 2024 – must be approved by a majority of SMS shareholders.

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

Fraser Tennant