Energy tech firm Smart Metering Systems plc is set for a £1.3 billion private equity takeover.

The company’s board agreed the deal with Sienna Bidco, a shell company wholly-owned by funds advised by US-headquartered Kohlberg Kravis Roberts & Co – better known as KKR.

SMS was founded in Glasgow in 1995 and floated on the AIM market in 2011 with a share price of 75p. The all-cash acquisition – yet to be approved by shareholders – is for 955p per share, a premium of around 40% to the closing price of 680p on Wednesday. It values SMS at approximately £1.3bn and an EBITDA multiple of 20x.

For the financial year ended 31st December 2022, it reported EBITDA of £63.8m and underlying profit before tax of £24.5m, with annualised recurring revenue of £97.1m.

SMS develops data collection, settlement and software solutions for gas and electricity supplies. It has an established smart meters platform with a growing capability in grid-scale battery storage assets and other carbon reduction activities.

KKR is a global investment firm that offers alternative asset management as well as capital markets and insurance solutions, with approximately $528bn in assets under management.

It has an infrastructure team of more than 115 individuals, including more than 90 investment professionals and over 25 additional value-creation executives that are fully dedicated to infrastructure. The firm has made over 80 infrastructure investments spanning the globe.

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“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,” SMS stated.

“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.”

SMS has a presence across eight locations and employs approximately 1,500 people, primarily in the UK.

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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