AIM-listed Smart Metering Systems is the latest UK company to receive a takeover approach by US private equity

Smart Metering Systems shares soared on Thursday after the power metering company received an offer from a US private equity group, KRR, with $528 billion in assets under management.

The latest approach for a UK company by US private equity shows that although domestic UK investors do not want to acknowledge the value in UK stocks, leaving them to languish at historically low multiples, US smart money sees an opportunity and is prepared to back their views with takeover approaches.

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Today’s approach by KKR for Smart Metering Systems follows yesterday’s news Ten Entertainment received a cash offer from another US private equity group, Trive Capital Partners.

KKR’s 955p offer for Smart Metering Systems values the company at an enterprise value of £1.4bn and an EV/EBITDA multiple of 20x. The 955p offer represents a 40% premium to the share price as of the close 6th December.

Smart Metering Systems shares were trading 41% higher at 958p at the time of writing on Thursday – above the 955p offer price. This suggests shareholders may reject the offer and await an improved bid. In the upcoming vote, 75% of SMS shareholders are required to vote in favour of the takeover.

Smart Metering Systems’ low-carbon energy infrastructure is a crucial part of the UK government’s net zero plans.

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The company was listed in London in 2011 and has consistently grown revenue in line with increasing smart meter installations. Smart Metering Systems also provides electric vehicle charging and has a network of grid-scale battery power storage facilities.

In a release by Smart Metering Systems on Thursday, the company said continuing in a private setting would provide the capital required to capture the opportunity in the energy transition. In other words, Smart Metering Systems and KRR feel funding opportunities as a public company are not conducive to growing a clean energy company.

Tara Davies, Partner and Co-Head of European Infrastructure at KKR, commented on the acquisition:

“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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