Glasgow-based Smart Metering Systems snapped up by NYC private equity firm in £1.3bn mega deal

SMS is set to become the latest Scottish plc to bow out of the stock market.

Glasgow-headquartered Smart Metering Systems (SMS) is being snapped up in a bumper £1.3 billion, private equity-backed deal.

The Aim-quoted firm, which in 2011 launched an initial public offering valuing it at £50 million, is being bought by Sienna Bidco, a newly formed company wholly owned by funds advised by New York-based private equity giant Kohlberg Kravis Roberts & Co. LP (KKR) and its affiliates.

The acquisition price represents a premium of about 40.4 per cent to SMS’s closing price of 680 pence per share on December 6 of this year, and each SMS shareholder will be entitled to receive 955 pence in cash for each share.

The Aim-quoted firm, which in 2011 launched an initial public offering valuing it at £50 million, is being bought by Sienna Bidco. Picture: contributed.

The deal, intended to be recommended unanimously by the SMS board, marks the loss of another Scottish plc from the stock market after power supplier Aggreko was sold in 2021, while others to have delisted include transport giant Stagecoach, digital chemistry specialist DeepMatter, and meal delivery firm Parsley Box.

KKR says it 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 that owns, installs and manages carbon-reduction assets. The deal implies an enterprise value of about £1.4bn.

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."

SMS chief executive Tim Mortlock also commented: "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."

SMS was incorporated in Scotland in October 2009, and in 2020 was included in a prestigious list of 1,000 companies to inspire Britain, the same year it sold a stake in its customer assets portfolio for £291m, allowing it to pay off debts and up its annual dividend. The organisation, which has been riding the smart meter roll-out wave, now describes itself as an integrated energy infrastructure company owning and managing meters, energy data, grid-scale batteries and other carbon reduction, and boasts about 1,500 staff, primarily in the UK.

It in the first half of this year reported pre-exceptional earnings before interest, taxes, depreciation, and amortisation (Ebitda) of £36.1m and underlying pre-tax profit of £11.2m, and said it expects its full-year 2024 pre-exceptional Ebitda to be “marginally ahead” of its previous expectations, with year-on-year growth of about 20 per cent, and underlying pre-tax profit predicted to be in line with the board's previous expectations.