Smart Metering Sys - Recommended cash acquisition
07/12/2023 07:01
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20231207:nRSG0133Wa&default-theme=true
RNS Number : 0133W Smart Metering Systems PLC 07 December 2023
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, IN, INTO OR
FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE
RELEVANT LAWS OF SUCH JURISDICTION
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION
FOR IMMEDIATE RELEASE
7 December 2023
RECOMMENDED CASH ACQUISITION
of
Smart Metering Systems plc ("SMS")
by
Sienna Bidco Limited ("Bidco")
a newly formed company wholly-owned by funds advised by Kohlberg Kravis
Roberts & Co. L.P. and its affiliates
to be effected by means of a scheme of arrangement
under Part 26 of the UK Companies Act 2006
Summary
· The boards of SMS and Bidco are pleased to announce that they have
reached agreement on the terms of a recommended all cash acquisition of the
entire issued and to be issued ordinary share capital of SMS by Bidco. The
Acquisition is to be effected by means of a scheme of arrangement under Part
26 of the Companies Act.
· Under the terms of the Acquisition, each SMS Shareholder shall be
entitled to receive:
for each SMS Share 955 pence
in cash
· The Acquisition Price represents an attractive premium of
approximately:
o 40.4 per cent. to the Closing Price of 680 pence per SMS Share on 6
December 2023 (being the last Business Day prior to the date of this
Announcement and the commencement of the Offer Period) (the "Latest
Practicable Date");
o 50.7 per cent. to the three-month Volume Weighted Average Price of 634
pence per SMS Share on the Latest Practicable Date; and
o 43.8 per cent. to the six-month Volume Weighted Average Price of 664 pence
per SMS Share on the Latest Practicable Date.
· The Acquisition values the entire issued and to be issued
ordinary share capital of SMS at approximately £1.3 billion on a fully
diluted basis, and this implies an enterprise value of approximately £1.4
billion.
· The Acquisition values SMS at an EV / EBITDA multiple of
20.0x (calculated based on LTM Pre-exceptional EBITDA of £71 million as of
June 2023).
· SMS Shareholders will be entitled to receive and retain the
Second FY 2023 Dividend Instalment of 8.31875 pence per SMS Share as announced
by SMS on 12 September 2023, which is expected to be paid on 25 January 2024
to those SMS Shareholders who appear on the register of members of the Company
on 5 January 2024.
· If any other dividend or distribution is announced, declared,
made or paid in respect of SMS Shares on or after the date of this
Announcement (including the Third and Fourth FY 2023 Dividend Instalments),
Bidco reserves the right to reduce the Acquisition Price by the amount of such
dividend or other distribution, except where the SMS Shares are or will be
acquired pursuant to the Scheme on a basis which entitles Bidco to receive
such dividend or other distribution and retain it. If Bidco exercised this
right or made such a reduction in respect of a dividend or other distribution,
SMS Shareholders would be entitled to retain that dividend or other
distribution and any reference in this Announcement to the consideration
payable under the Scheme shall be deemed to be a reference to the
consideration as so reduced.
Transaction overview
· All-cash acquisition of SMS by Bidco, intended to be recommended
unanimously by the SMS Board.
· The offer price represents a significant premium to the current share
price and allows shareholders to realise immediate and attractive value for
their shareholding.
· KKR believes that 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.
· 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.
· 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.
SMS recommendation
· The SMS Directors, who have been so advised by Investec and RBC as to
the financial terms of the Acquisition, consider the terms of the Acquisition
to be fair and reasonable. In providing their advice to the SMS Directors,
Investec and RBC have taken into account the commercial assessments of the SMS
Directors. Investec is providing independent financial advice to the SMS
Directors for the purposes of Rule 3 of the Takeover Code.
· Accordingly, the SMS Directors intend to recommend unanimously that
SMS Shareholders vote in favour of the Scheme at the Court Meeting and that
SMS Shareholders vote in favour of the Special Resolutions to be proposed at
the SMS General Meeting (or, if Bidco, with the consent of the Panel,
subsequently structures the Acquisition as a Takeover Offer, to accept any
Takeover Offer made by Bidco in accordance with the terms of the irrevocable
undertaking), as the SMS Directors who hold interests in SMS Shares have
irrevocably undertaken to do in respect of their own legal and/or beneficial
holdings which are under their control of 141,341 SMS Shares, in aggregate,
representing approximately 0.1 per cent. of SMS's issued ordinary share
capital on the Latest Practicable Date, as detailed in Appendix III to this
Announcement.
Information on the SMS Group
· SMS was incorporated in Scotland in October 2009 and the SMS Shares
were admitted to trading on AIM on 8 July 2011.
· SMS is a fully integrated energy infrastructure company owning and
managing meter assets, energy data, grid-scale batteries and other carbon
reduction (CaRe) assets. The group manages and optimises these assets through
its in-house technology and data analytical platform "METIS".
· Established in 1995, 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.
· Since its IPO, SMS has grown to become one of the UK leaders in smart
energy assets and related data services. SMS provides a fully-integrated
offering, as an end-to-end installer, owner and operator of smart energy
assets, including smart meters, grid-scale battery storage systems, electric
vehicle chargers and other behind the meter assets such as solar, storage and
heat pumps. Its solutions are widely used across a number of settings,
primarily industrial, commercial and public sectors, and the wider domestic
market.
· SMS is one of the leaders in the low carbon, smart energy revolution
in the UK and is committed to reducing its own carbon emissions to net zero by
2030. SMS has been recognised with the London Stock Exchange's Green Economy
Mark every year since it was introduced in 2019.
· SMS is headquartered in Glasgow with a presence across over eight
locations. SMS is quoted on AIM.
· SMS employs approximately 1,500 people, primarily in the UK, and for
the financial year ended 31 December 2022, SMS reported Pre-exceptional EBITDA
of £63.8 million and Underlying Profit Before Tax of £24.5 million. At 31
December 2022 SMS had index-linked annualised recurring revenue (ILARR) of
£97.1 million.
· At 30 June 2023 SMS reported ILARR of £110.0 million. For the six
month period ended 30 June 2023, SMS reported Pre-exceptional EBITDA of £36.1
million and Underlying Profit Before Tax of £11.2 million.
Information on Bidco and KKR
· Bidco is a newly formed company indirectly wholly-owned by funds
advised by KKR. KKR is a leading global investment firm that offers
alternative asset management as well as capital markets and insurance
solutions, with approximately US$528 billion in assets under management as of
30 September 2023. KKR aims to generate attractive investment returns by
following a patient and disciplined investment approach, employing world-class
people, and supporting growth in its portfolio companies and communities.
· KKR has 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 that are fully
dedicated to Infrastructure. The firm has made over 80 infrastructure
investments spanning the globe across various sectors including renewables,
utilities, midstream, transportation, water and communications. Its portfolio
companies have assets across many geographies, including the US, Canada,
Mexico, Germany, France, Spain, and the UK, amongst others.
· KKR will invest in the Acquisition largely through KKR Global
Infrastructure Investors IV, a US$17 billion fund focused on critical
infrastructure investments with low volatility and strong downside protection
where KKR believes it can achieve attractive risk-adjusted returns by
leveraging its experienced team, risk-based strategy, long track record of
operational value creation, and global network of industry experts.
Timetable and Conditions
· The Acquisition will be put to SMS Shareholders at the Court Meeting
and at the SMS General Meeting. The Court Meeting and the SMS General Meeting
are required to enable SMS Shareholders to consider and, if thought fit, vote
in favour of the Scheme and the resolutions to approve and implement the
Scheme. In order to become Effective, the Scheme must be approved by a
majority in number of the SMS Shareholders present, entitled to vote and
voting at the Court Meeting, either in person or by proxy, representing at
least 75 per cent. in value of the SMS Shares voted. In addition, Special
Resolutions approving and implementing the Scheme must be passed by SMS
Shareholders representing at least 75 per cent. of votes cast at the SMS
General Meeting.
· The Acquisition will be subject to the Conditions and further terms
set out in Appendix I to this Announcement. It is expected that the Scheme
will become Effective in Q1 2024.
· Bidco will work with SMS to engage constructively with all relevant
stakeholders to satisfy these Conditions.
· The Scheme Document, containing further information about the
Acquisition and notices of the Court Meeting and the SMS General Meeting,
together with the forms of proxy, is expected to be published within 28 days
of the date of this Announcement (unless otherwise agreed by the Panel, Bidco
and SMS).
Commenting on the Acquisition, 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."
Commenting on the Acquisition, 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."
This summary should be read in conjunction with, and is subject to, the full
text of this Announcement. The Acquisition shall be subject to the Conditions
and further terms set out in Appendix I to this Announcement and to the full
terms and conditions which shall be set out in the Scheme Document. Appendix
II to this Announcement contains the sources of information and bases of
calculations of certain information contained in this summary and the
Announcement, Appendix III contains a summary of the irrevocable undertakings
received in relation to this Acquisition and Appendix IV contains definitions
of certain expressions used in this summary and in this Announcement.
This Announcement is being made on behalf of SMS by Craig McGinn, Group
Company Secretary.
Enquiries:
Morgan Stanley (Joint Financial Adviser to KKR) +44 (0) 20 7425 8000
Shirav Patel / Francesco Puletti / Andrew Foster / George Chalaris / Nagib
Ahmad
Macquarie Capital (Joint Financial Adviser to KKR) +44 (0) 20 3037 2000
Adam Hain / Ashish Mehta
FGS Global (PR Adviser to KKR) KKR-LON@fgsglobal.com
Faeth Birch / Alastair Elwen / Sophia Johnston +44 (0) 20 725 13801
Smart Metering Systems plc +44 (0) 141 249 3850
Miriam Greenwood, Chairman
Tim Mortlock, Chief Executive Officer
Gail Blain, Chief Financial Officer
Dilip Kejriwal, Head of Investor Relations
RBC Capital Markets (Joint Financial Adviser and Joint Broker to SMS) +44 (0) 20 7653 4000
Mark Preston / Evgeni Jordanov / Matthew Coakes / Sam Jackson
Investec Bank plc (Joint Financial Adviser and Joint Broker to SMS) +44 (0) 20 7597 5970
Henry Reast / James Rudd / Shalin Bhamra
Cavendish Securities plc (Nomad and Joint Broker to SMS) +44 (0) 131 220 6939
Neil McDonald / Peter Lynch / Adam Rae
Instinctif Partners (Public Relations Adviser to SMS) sms@instinctif.com (mailto:sms@instinctif.com)
Tim Linacre
Guy Scarborough +44 (0) 7949 939 237
+44 (0) 7917 178 920
Hogan Lovells International LLP is acting as legal adviser to SMS in
connection with the Acquisition. Simpson Thacher & Bartlett LLP is acting
as legal adviser to KKR and Bidco. Burness Paull LLP are providing legal
advice to SMS as to Scottish law.
Important Notices
RBC Europe Limited (trading as RBC Capital Markets), which is authorised by
the Prudential Regulation Authority and regulated by the Financial Conduct
Authority and the Prudential Regulation Authority in the United Kingdom, is
acting for SMS and no one else in connection with the matters referred to in
this announcement and will not be responsible to anyone other than SMS for
providing the protections afforded to clients of RBC Capital Markets, or for
providing advice in connection with matters referred to in this announcement.
Investec, which is authorised by the Prudential Regulation Authority (the
"PRA") and regulated by the Financial Conduct Authority and PRA in the United
Kingdom, is acting exclusively as financial adviser to SMS and for no one else
in connection with the Offer and will not be responsible to any person other
than SMS for providing the protections afforded to clients of Investec, nor
for providing advice in relation to the Offer, the content of this
announcement or any matter referred to in this announcement. Neither Investec
nor any of its subsidiaries, branches or affiliates owes or accepts any duty,
liability or responsibility whatsoever (whether direct or indirect, whether in
contract, in tort, under statute or otherwise) to any person who is not a
client of Investec in connection with this announcement, any statement
contained herein or otherwise.
Cavendish Securities, which is authorised and regulated in the United Kingdom
by the Financial Conduct Authority, is acting exclusively for SMS and no one
else in connection with the subject matter of this Announcement and will not
be responsible to anyone other than SMS for providing the protections afforded
to clients of Cavendish Securities or for providing advice in relation to the
subject matter of this Announcement, the contents of this Announcement and any
other matters referred to in this Announcement.
Morgan Stanley & Co. International plc ("Morgan Stanley") which is
authorised by the Prudential Regulation Authority and regulated by the
Financial Conduct Authority and the Prudential Regulation Authority in the UK
is acting as financial adviser exclusively for KKR and no one else in
connection with the matters set out in this announcement. In connection with
such matters, Morgan Stanley, its affiliates and their respective directors,
officers, employees and agents will not regard any other person as their
client, nor will they be responsible to any other person for providing the
protections afforded to their clients or for providing advice in connection
with the contents of this announcement or any other matter referred to herein.
Macquarie Capital (Europe) Limited ("Macquarie Capital") which is regulated by
the Financial Conduct Authority in the UK is acting as financial adviser
exclusively for KKR and no one else in connection with the matters set out in
this announcement. In connection with such matters, Macquarie Capital, its
affiliates and their respective directors, officers, employees and agents will
not regard any other person as their client, nor will they be responsible to
any other person for providing the protections afforded to their clients or
for providing advice in connection with the contents of this announcement or
any other matter referred to herein. Macquarie Capital (Europe) Limited is not
an authorised deposit-taking institution for the purposes of the Banking Act
1959 (Commonwealth of Australia), and its obligations do not represent
deposits or other liabilities of Macquarie Bank Limited ABN 46 008 583 542.
Any investments are subject to investment risk including possible delays in
repayment and loss of income and principal invested. Macquarie Bank Limited
does not guarantee or otherwise provide assurance in respect of the
obligations of Macquarie Capital (Europe) Limited.
Further Information
This Announcement is for information purposes only and does not constitute or
form any part of an offer to sell or subscribe for or an invitation to
purchase or subscribe for any securities or the solicitation of an offer to
buy any securities, pursuant to the Acquisition or otherwise. The Acquisition
shall be made solely by means of the Scheme Document (or, if, with the consent
of the Panel, the Acquisition is implemented by way of a Takeover Offer, any
document by which the Acquisition is made) which, together with the Forms of
Proxy (or forms of acceptance), shall contain the full terms and Conditions of
the Acquisition, including details of how to vote in respect of the
Acquisition. SMS Shareholders are strongly advised to read the formal
documentation in relation to the Acquisition once it has been despatched. Each
SMS Shareholder is urged to consult its independent professional adviser
immediately regarding the tax consequences to it (or its beneficial owners) of
the Acquisition.
The statements contained in this Announcement are made as at the date of this
Announcement, unless some other time is specified in relation to them, and
publication of this Announcement shall not give rise to any implication that
there has been no change in the facts set forth in this Announcement since
such date.
This Announcement has been prepared for the purpose of complying with English
and Scots law and the Takeover Code and the information disclosed may not be
the same as that which would have been disclosed if this Announcement had been
prepared in accordance with the laws of jurisdictions outside of England and
Scotland.
This Announcement does not constitute a prospectus or prospectus equivalent
document.
Overseas Shareholders
The release, publication or distribution of this Announcement in or into
certain jurisdictions other than the United Kingdom may be restricted by law.
Persons who are not resident in the United Kingdom should inform themselves
of, and observe, any applicable requirements.
Unless otherwise determined by Bidco or required by the Takeover Code, and
permitted by applicable law and regulation, the Acquisition shall not be made
available, directly or indirectly, in, into or from a Restricted Jurisdiction
where to do so would violate the laws in that jurisdiction and no person may
vote in favour of the Acquisition by any such use, means, instrumentality or
form within a Restricted Jurisdiction or any other jurisdiction if to do so
would constitute a violation of the laws of that jurisdiction. Accordingly,
copies of this Announcement and all documents relating to the Scheme and the
Acquisition are not being, and must not be, directly or indirectly, mailed or
otherwise forwarded, distributed or sent in, into or from a Restricted
Jurisdiction where to do so would violate the laws in that jurisdiction, and
persons receiving this Announcement and all documents relating to the
Acquisition (including custodians, nominees and trustees) must not mail or
otherwise distribute or send them in, into or from such jurisdictions where to
do so would violate the laws in that jurisdiction. Doing so may render invalid
any related purported vote in respect of the Acquisition.
The availability of the Acquisition to SMS Shareholders who are not resident
in the United Kingdom (and, in particular, their ability to vote their SMS
Shares with respect to the Scheme at the Court Meeting, or to appoint another
person as proxy to vote at the Court Meeting on their behalf) may be affected
by the laws of the relevant jurisdictions in which they are resident. Persons
who are not resident in the United Kingdom should inform themselves of, and
observe, any applicable requirements, as any failure to comply with such
requirements may constitute a violation of the securities laws of any such
jurisdiction. To the fullest extent permitted by applicable law, the companies
and persons involved in the Acquisition disclaim any responsibility or
liability for the violation of such restrictions by any person.
The Acquisition shall be subject to the applicable requirements of the
Takeover Code, the Panel, the London Stock Exchange, the Financial Conduct
Authority and the AIM Rules. Further details in relation to Overseas
Shareholders will be contained in the Scheme Document.
Additional Information for US Investors
The Acquisition is being made to acquire the securities of a Scottish company
by means of a scheme of arrangement provided for under Scots law. A
transaction effected by means of a scheme of arrangement is not subject to the
tender offer or proxy solicitation rules under the US Exchange Act.
Accordingly, the Scheme will be subject to disclosure requirements and
practices applicable in the United Kingdom to schemes of arrangement, which
are different from the disclosure requirements of the US tender offer and
proxy solicitation rules. Certain financial information included in this
Announcement and the Scheme documentation has been or will have been prepared
in accordance with accounting standards applicable in the United Kingdom and
thus may not be comparable to financial information of US companies or
companies whose financial statements are prepared in accordance with generally
accepted accounting principles in the US. If Bidco were to elect to implement
the Acquisition by means of a Takeover Offer, such Takeover Offer would be
made in compliance with applicable US laws and regulations, including Section
14(e) of the US Exchange Act and Regulation 14E thereunder. Such a takeover
would be made in the United States by Bidco and no one else.
The receipt of cash pursuant to the Acquisition by a US SMS Shareholder as
consideration for the transfer of its SMS Shares pursuant to the Scheme will
likely be a taxable transaction for United States federal income tax purposes
and under applicable United States state and local, as well as foreign and
other, tax laws. SMS Shareholders are urged to consult their independent
professional advisers immediately regarding the tax consequences of the
Acquisition applicable to them.
It may be difficult for US SMS Shareholders to enforce their rights and claims
arising out of the US federal securities laws, since Bidco and SMS are located
in countries other than the US, and some or all of their officers and
directors may be residents of countries other than the US. US SMS Shareholders
may not be able to sue a non-US company or its officers or directors in a
non-US court for violations of US securities laws. Further, it may be
difficult to compel a non-US company and its affiliates to subject themselves
to a US court's jurisdiction and judgement.
In accordance with normal UK practice and pursuant to Rule 14e-5(b) of the US
Exchange Act, Bidco, certain affiliated companies and their nominees or
brokers (acting as agents) may make certain purchases of, or arrangements to
purchase, shares in SMS outside of the US, other than pursuant to the
Acquisition, until the date on which the Acquisition and/or Scheme becomes
Effective, lapses or is otherwise withdrawn. Also, in accordance with Rule
14e-5(b) of the US Exchange Act, each of Morgan Stanley, Macquarie Capital,
Investec and RBC will continue to act as a connected exempt principal trader
in SMS Shares on the London Stock Exchange. If such purchases or arrangements
to purchase were to be made they would occur either in the open market at
prevailing prices or in private transactions at negotiated prices and comply
with applicable law, including the US Exchange Act. Any information about such
purchases or arrangements to purchase will be disclosed as required in the
United Kingdom, will be reported to a Regulatory Information Service and will
be available on the London Stock Exchange website at
http://www.londonstockexchange.com (http://www.londonstockexchange.com) .
Forward Looking Statements
This Announcement (including information incorporated by reference in this
Announcement), oral statements made regarding the Acquisition, and other
information published by KKR, Bidco or SMS may contain statements about Bidco
and SMS that are or may be deemed to be forward looking statements. All
statements other than statements of historical facts included in this
Announcement may be forward looking statements. Without limitation, any
statements preceded or followed by or that include the words "targets",
"plans", "believes", "expects", "aims", "intends", "will", "may", "shall",
"should", "anticipates", "estimates", "projects", "is subject to", "budget",
"scheduled", "forecast" or words or terms of similar substance or the negative
thereof, are forward looking statements. Forward looking statements include
statements relating to the following: (i) future capital expenditures,
expenses, revenues, earnings, synergies, economic performance, indebtedness,
financial condition, dividend policy, losses and future prospects;
(ii) business and management strategies and the expansion and growth of
Bidco's or SMS's operations and potential synergies resulting from the
Acquisition; and (iii) the effects of government regulation on Bidco's or
SMS's business.
Such forward looking statements are prospective in nature and are not based on
historical facts, but rather on current expectations and projections of the
management of Bidco and SMS about future events, and are therefore subject to
risks and uncertainties that could significantly affect expected results and
are based on certain key assumptions. Many factors could cause actual results
to differ materially from those projected or implied in any forward looking
statements, including: increased competition, the loss of or damage to one or
more key customer relationships, changes to customer ordering patterns, delays
in obtaining customer approvals for engineering or price level changes, the
failure of one or more key suppliers, the outcome of business or industry
restructuring, the outcome of any litigation, changes in economic conditions,
currency fluctuations, changes in interest and tax rates, changes in raw
material or energy market prices, changes in laws, regulations or regulatory
policies, developments in legal or public policy doctrines, technological
developments, the failure to retain key management, or the timing and success
of future acquisition opportunities or major investment projects. Other
unknown or unpredictable factors could cause actual results to differ
materially from those in the forward looking statements. Such forward looking
statements should therefore be construed in the light of such factors. Neither
Bidco nor SMS, nor any of their respective associates or directors, officers
or advisers, provides any representation, assurance or guarantee that the
occurrence of the events expressed or implied in any forward looking
statements in this Announcement will actually occur. Due to such uncertainties
and risks, readers are cautioned not to place undue reliance on such forward
looking statements, which speak only as of the date hereof. All subsequent
oral or written forward looking statements attributable to any member of the
Bidco Group or the SMS Group, or any of their respective associates,
directors, officers, employees or advisers, are expressly qualified in their
entirety by the cautionary statement above.
Bidco and SMS expressly disclaim any obligation to update any forward looking
or other statements contained herein, except as required by applicable law or
by the rules of any competent regulatory authority, whether as a result of new
information, future events or otherwise.
No Profit Forecasts or Profit Estimates or Quantified Financial Benefit
Statements
No statement in this Announcement is intended as, or is to be construed as, a
profit forecast, profit estimate or quantified financial benefits statement
for any period and no statement in this Announcement should be interpreted to
mean that earnings or earnings per share for SMS for the current or future
financial years would necessarily match or exceed the historical published
earnings or earnings per share for SMS.
Disclosure Requirements of the Takeover Code
Under Rule 8.3(a) of the Takeover Code, any person who is interested in 1 per
cent. or more of any class of relevant securities of an offeree company or of
any securities exchange offeror (being any offeror other than an offeror in
respect of which it has been announced that its offer is, or is likely to be,
solely in cash) must make an Opening Position Disclosure following the
commencement of the Offer Period and, if later, following the announcement in
which any securities exchange offeror is first identified. An Opening Position
Disclosure must contain details of the person's interests and short positions
in, and rights to subscribe for, any relevant securities of each of (i) the
offeree company and (ii) any securities exchange offeror(s). An Opening
Position Disclosure by a person to whom Rule 8.3(a) applies must be made by no
later than 3.30 p.m. (London time) on the 10th Business Day following the
commencement of the Offer Period and, if appropriate, by no later than 3.30
p.m. (London time) on the 10th Business Day following the announcement in
which any securities exchange offeror is first identified. Relevant persons
who deal in the relevant securities of the offeree company or of a securities
exchange offeror prior to the deadline for making an Opening Position
Disclosure must instead make a Dealing Disclosure.
Under Rule 8.3(b) of the Takeover Code, any person who is, or becomes,
interested in 1 per cent. or more of any class of relevant securities of the
offeree company or of any securities exchange offeror must make a Dealing
Disclosure if the person deals in any relevant securities of the offeree
company or of any securities exchange offeror. A Dealing Disclosure must
contain details of the dealing concerned and of the person's interests and
short positions in, and rights to subscribe for, any relevant securities of
each of (i) the offeree company and (ii) any securities exchange offeror, save
to the extent that these details have previously been disclosed under Rule 8.
A Dealing Disclosure by a person to whom Rule 8.3(b) applies must be made by
no later than 3.30 p.m. (London time) on the Business Day following the date
of the relevant dealing.
If two or more persons act together pursuant to an agreement or understanding,
whether formal or informal, to acquire or control an interest in relevant
securities of an offeree company or a securities exchange offeror, they will
be deemed to be a single person for the purpose of Rule 8.3.
Opening Position Disclosures must also be made by the offeree company and by
any offeror and Dealing Disclosures must also be made by the offeree company,
by any offeror and by any persons acting in concert with any of them (see
Rules 8.1, 8.2 and 8.4).
Details of the offeree and offeror companies in respect of whose relevant
securities Opening Position Disclosures and Dealing Disclosures must be made
can be found in the Disclosure Table on the Panel's website at
http://www.thetakeoverpanel.org.uk/, including details of the number of
relevant securities in issue, when the Offer Period commenced and when any
offeror was first identified. If you are in any doubt as to whether you are
required to make an Opening Position Disclosure or a Dealing Disclosure, you
should contact the Panel's Market Surveillance Unit on +44 (0)20 7638 0129.
Electronic Communications
Please be aware that addresses, electronic addresses and certain information
provided by SMS Shareholders, persons with information rights and other
relevant persons for the receipt of communications from SMS may be provided to
Bidco during the Offer Period as required under Section 4 of Appendix 4 of the
Takeover Code to comply with Rule 2.11(c) of the Takeover Code.
Publication on Website and Availability of Hard Copies
A copy of this Announcement and the documents required to be published by Rule
26 of the Takeover Code shall be made available subject to certain
restrictions relating to persons resident in Restricted Jurisdictions on SMS's
website at www.sms-plc.com by no later than 12 noon (London time) on the
Business Day following the date of this Announcement. For the avoidance of
doubt, neither the contents of this website nor the content of any other
website accessible from hyperlinks on such website is incorporated into, or
forms part of, this Announcement.
In accordance with Rule 30.3 of the Takeover Code, SMS Shareholders, persons
with information rights and participants in the SMS Share Plans may request a
hard copy of this Announcement by contacting Computershare Investor Services
PLC during business hours on 0370 707 4087 or by submitting a request in
writing to Registrar at Computershare Investor Service PLC, The Pavilions,
Bridgwater Road, Bristol BS99 6ZZ. In accordance with Rule 30.3 of the
Takeover Code, a person so entitled may also request that all future
documents, announcements and information in relation to the Acquisition should
be sent to them in hard copy form. If you have received this Announcement in
electronic form or via a website notification, hard copies of this
Announcement and any document or information incorporated by reference into
this document will not be provided unless such a request is made.
Rounding
Certain figures included in this Announcement have been subjected to rounding
adjustments. Accordingly, figures shown for the same category presented in
different tables may vary slightly and figures shown as totals in certain
tables may not be an arithmetic aggregation of the figures that precede them.
Rule 2.9 Disclosure
In accordance with Rule 2.9 of the Takeover Code, SMS confirms that as at the
date of this Announcement, it has in issue and admitted to trading on AIM
133,606,918 ordinary shares of £0.01 each (excluding ordinary shares held in
treasury). The International Securities Identification Number (ISIN) of the
ordinary shares is GB00B4X1RC86.
General
If you are in any doubt about the contents of this Announcement or the action
you should take, you are recommended to seek your own independent financial
advice immediately from your stockbroker, bank manager, solicitor, accountant
or independent financial adviser duly authorised under FSMA if you are
resident in the United Kingdom or, if not, from another appropriately
authorised independent financial adviser.
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART, IN, INTO OR
FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE
RELEVANT LAWS OF SUCH JURISDICTION
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION
FOR IMMEDIATE RELEASE
7 December 2023
RECOMMENDED CASH ACQUISITION
of
Smart Metering Systems plc ("SMS")
by
Sienna Bidco Limited ("Bidco")
a newly formed company wholly-owned by funds advised by Kohlberg Kravis
Roberts & Co. L.P. and its affiliates
to be effected by means of a scheme of arrangement
under Part 26 of the UK Companies Act 2006
1 Introduction
The boards of Bidco and SMS are pleased to announce that they have reached
agreement on the terms of a recommended all cash acquisition of the entire
issued and to be issued ordinary share capital of SMS by Bidco. The
Acquisition is to be effected by means of a scheme of arrangement under Part
26 of the Companies Act.
Upon completion of the Acquisition, SMS will be wholly-owned by Bidco.
2 The Acquisition
Under the terms of the Acquisition, which shall be subject to the Conditions
and further terms set out in Appendix I to this Announcement and to be set out
in the Scheme Document, SMS Shareholders who are on the register of members of
SMS at the Scheme Record Time shall be entitled to receive:
for each SMS Share 955 pence
in cash
The Acquisition Price per SMS Share represents an attractive premium of
approximately:
· 40.4 per cent. to the Closing Price of 680 pence per
SMS Share on the Latest Practicable Date;
· 50.7 per cent. to the three-month Volume Weighted Average Price
of 634 pence per SMS Share on the Latest Practicable Date; and
· 43.8 per cent. to the six-month Volume Weighted Average
Price of 664 pence per SMS Share on the Latest Practicable Date.
The Acquisition values the entire issued and to be issued ordinary share
capital of SMS at approximately £1.3 billion on a fully diluted basis, and
this implies an enterprise value of approximately £1.4 billion.
The Acquisition values SMS at an EV / EBITDA multiple of 20.0x (calculated
based on LTM Pre-exceptional EBITDA of £71 million as of June 2023).
SMS Shareholders will be entitled to receive and retain the Second FY 2023
Dividend Instalment of 8.31875 pence per SMS Share as announced by SMS on 12
September 2023, which is expected to be paid on 25 January 2024 to those SMS
Shareholders who appear on the register of members of the Company on 5 January
2024. If any other dividend or distribution is announced, declared, made or
paid in respect of SMS Shares on or after the date of this Announcement
(including the Third and Fourth FY 2023 Dividend Instalments), Bidco reserves
the right to reduce the Acquisition Price by the amount of such dividend or
other distribution except where the SMS Shares are or will be acquired
pursuant to the Scheme on a basis which entitles Bidco to receive such
dividend or other distribution and retain it. If any such dividend or
distribution is paid after the date of this Announcement and Bidco exercised
its rights described in the preceding sentence, SMS Shareholders would be
entitled to retain any such dividend or other distribution and any reference
in this Announcement to the consideration payable under the Scheme shall be
deemed to be a reference to the consideration as so reduced.
The Scheme Document, containing further information about the Acquisition and
notices of the Court Meeting and the SMS General Meeting, together with the
forms of proxy, is expected to be published within 28 days of the date of this
Announcement unless otherwise agreed by the Panel, Bidco and SMS.
3 Background to and reasons for the Acquisition
KKR believes that SMS is a business of high quality, with a strong and highly
experienced management team and with the potential to substantially contribute
to and enable the energy transition. Today, the business has an established
smart meters platform with growing presence in grid-scale battery storage
assets and the potential to further scale carbon reduction assets, and play a
leading role to support the UK Government's ambition to be net zero by 2050.
KKR believes that SMS is successfully executing a transition from a metering
provider to a fully integrated, end-to-end energy infrastructure company which
owns, installs and manages carbon reduction assets. The profile of SMS's
metering and battery storage assets together with their long-term, highly
contracted, and inflation-protected cash flow streams display the key
attributes KKR seeks in its infrastructure investments.
The energy transition is driving substantial changes in the underlying energy
markets and there is a clear opportunity for SMS to invest at scale behind the
low carbon revolution and further develop its platform and carbon reduction
asset base. This strategy, however, is highly capital-intensive and KKR does
not believe that SMS's current financial structure allows the business to
invest at the level required to execute successfully and make the most of the
growth opportunity. Private ownership can better facilitate this by allowing
SMS to make sustained capital investments, take a more agile approach and
avoid the need for asset recycling to fund growth initiatives. To this effect,
KKR believes it has made an attractive offer to SMS's shareholders which
delivers the certainty of cash today, in contrast to the risks, uncertainty
and significant capital requirements associated with delivering SMS's strategy
and future growth.
KKR's experience, capabilities and long-term partnership approach will enable
it to be a committed and responsible partner and to add value as SMS
progresses through its next phase of development, in particular by enabling
significantly greater access to long-term flexible capital and leveraging
KKR's operational expertise as an active investor. KKR has significant
experience in investing at scale behind the energy transition in the UK and
globally, as well as a track record of successful execution in growing and
scaling energy and infrastructure businesses through active management. KKR
will provide SMS and its management team with operational expertise and the
firm's full global platform and value creation resources.
4 Recommendation
The SMS Directors, who have been so advised by Investec and RBC as to the
financial terms of the Acquisition, consider the terms of the Acquisition to
be fair and reasonable. In providing their advice to the SMS Directors,
Investec and RBC have taken into account the commercial assessments of the SMS
Directors. Investec is providing independent financial advice to the SMS
Directors for the purposes of Rule 3 of the Takeover Code.
Accordingly, the SMS Directors intend to recommend unanimously that SMS
Shareholders vote in favour of the Scheme at the Court Meeting and that SMS
Shareholders vote in favour of the Special Resolutions to be proposed at the
SMS General Meeting (or, if Bidco, with the consent of the Panel, subsequently
structures the Acquisition as a Takeover Offer, to accept any Takeover Offer
made by Bidco in accordance with the terms of the irrevocable undertaking), as
the SMS Directors who hold interests in SMS Shares have irrevocably undertaken
to do in respect of their own legal and/or beneficial holdings which are under
their control of 141,341 SMS Shares, in aggregate, representing approximately
0.1 per cent. of SMS's issued ordinary share capital on the Latest Practicable
Date, as detailed in Appendix III to this Announcement.
Miriam Greenwood, Chairman of the SMS Board, has a potential interest in the
Acquisition by virtue of being appointed on 16 November 2023 as a
non-executive director of Liontrust Asset Management PLC, a subsidiary of
which is SMS's largest indirect beneficial shareholder as at the date of this
Announcement. In addition, Tim Mortlock (Chief Executive Officer of SMS) and
Gail Blain (Chief Financial Officer of SMS) have a potential interest in the
Acquisition as it is expected that they will continue as SMS Directors
following the Effective Date. These possible conflicts have been authorised by
the Company's non-conflicted directors in accordance with the Articles.
5 Background to and reasons for the recommendation
Background to the recommendation
In 2011 SMS undertook an initial public offering ("IPO") as it considered the
public equity market to be the optimum route to access capital to grow the
business. Since then, SMS has developed into a fully integrated energy
infrastructure company which owns, installs and manages a wide range of carbon
reduction ("CaRe") products and solutions, playing an important part in the
UK's energy transition.
The SMS Group has established a significant asset base generating long-term
secure recurring cashflows, a strong growth pipeline and substantial
additional opportunities as the UK transitions to Net Zero whilst, the SMS
Directors believe, creating long-term sustainable value for its stakeholders.
During this period, SMS has grown its market capitalisation from £50 million
at listing to £909 million as at 6 December 2023 (being the last Business Day
before the Announcement Date).
SMS has built a leading market position in its metering business with a
portfolio of c. 4.5 million metering and data assets under management,
including c. 2.3 million domestic smart electricity and gas meters and a
contracted smart meter order pipeline of c. 1.95 million meters.
Further, management has diversified SMS's operations. SMS's infrastructure
team design, install, own, operate, maintain and optimise grid-scale battery
energy storage systems ("BESS") across the UK. The SMS Group has the UK's
fourth-largest portfolio of operational BESS assets, and a pipeline for 860MW
of assets, of which 240MW are currently operational, 370MW secured (of which
50MW is under construction and 320MW in pre-construction) and a further 250MW
under exclusivity.
In addition, the SMS Group's Energy Services division provides utility
connections and energy consultancy services, funding and delivery solutions to
Industrial & Commercial ("I&C") customers, whilst its residential
division is developing Behind-the-Meter solar, storage, heat and electric
vehicle services to domestic households. SMS is also actively deploying
electric vehicle charging solutions, working alongside a wide range of
industry partners and stakeholders.
Underpinning all of these services is the SMS Group's cloud-based data
platform, METIS, which operates CaRe assets distributed across the energy
system. The SMS Group's industry accredited services, which the SMS Directors
believe are critical to a decentralised and flexible energy system, provide a
strong basis from which to deliver these asset and data solutions efficiently
to the SMS Group's I&C customers, energy suppliers and other energy
industry participants, and, through its growing grid-scale battery business,
the SMS Group's participation in the wholesale electricity market alongside
national energy networks.
The SMS Group's near-term pipeline of 1.95 million smart meters and 620MW of
BESS (together, the "Existing Pipeline") will deliver substantial growth over
the next four years, and can be fully funded from asset-backed
internally-generated cash flows and additional debt facilities. However, this
would result in peak leverage levels of approximately 4x net debt / EBITDA
limiting the SMS Group's further growth. Interest rates, and therefore the
cost of capital are also materially more expensive today than during the prior
period since IPO. The SMS Board believes that public market investors are
currently cautious of such levels of leverage for mid-cap companies,
notwithstanding the stable, infrastructure-style characteristics of the SMS
Group's asset base. Accordingly, as disclosed in the SMS Group's recent half
year results, the Company has considered selective asset recycling to maintain
a more conservative level of gearing and to provide capacity for further
pipeline growth. This however has potential to dilute the Company's ability to
deliver its stated wider strategy and, ultimately, grow beyond its Existing
Pipeline over the long-term.
In addition to the Existing Pipeline, the SMS Directors believe the SMS Group
has a large and attractive pipeline of broader opportunities including, but
not limited to, the ongoing BESS rollout with an aggregate minimum target of
1,500MW operational by 2030 (plus an extension of this pipeline to longer
duration two-hour storage), together with the development of wider CaRe
products and services in strategically aligned adjacent markets with differing
revenue profiles. In order to fully capitalise on these additional BESS and
CaRe opportunities, SMS would need to continue to transition its engineering
resources to deliver these new asset classes. 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.
Factors considered by the SMS Board
Against this backdrop, the SMS Board received an approach from KKR, a highly
experienced infrastructure investor with expertise investing behind the energy
transition, which, following a period of negotiation, led to the agreement of
a proposal to acquire the SMS Group at a price of 955 pence per SMS Share.
The SMS Board carefully considered this proposal and, while the SMS Board
believes SMS is well-positioned to make continued operational and financial
progress, the SMS Board has concluded that the terms of the Acquisition
recognise the strengths of SMS's business, and provides SMS shareholders with
an immediate and attractive outcome, with certainty in cash, compared with the
SMS Group continuing to pursue its independent strategy.
In considering the terms of the Acquisition, the SMS Directors have taken into
account a number of factors including:
· the significant premium of approximately:
o 40.4 per cent. to the Closing Price of 680 pence per SMS Share on 6
December 2023 (being the last Business Day before the commencement of the
Offer Period); and
o 50.7 per cent. to the volume-weighted average price of 634 pence per SMS
Share for the three-month period ended 6 December 2023 (being the last
Business Day before the commencement of the Offer Period).
· that the Acquisition values SMS at an EV / EBITDA multiple of
20.0x (calculated based on LTM Pre-exceptional EBITDA of £71 million as of
June 2023);
· that the certainty of the all-cash nature of the consideration
payable pursuant to the Acquisition will provide SMS Shareholders with the
opportunity to receive an immediate and attractive cash sum for all of their
SMS Shares, weighed against the risks associated with the delivery of future
potential value in the business given the uncertainty and volatility in the
broader capital markets and macroeconomic environment which are expected to
persist for a period;
· that the delivery of the Existing Pipeline and additional
pipeline is subject to commercial and market risks and will require
significant additional funding which, given an increasing cost of capital
environment, may be challenging for SMS as a publicly listed business. The SMS
Board believes that, under private ownership, SMS would be able to fund and
accelerate the delivery of its strategy and growth pipeline through access to
significant flexible, long-term capital from KKR, a highly supportive investor
which invests over the long-term and brings extensive operational expertise
and resources from its global platform;
· that SMS's trading performance and growth potential have not, in
the view of the SMS Board, been appropriately reflected in the price and
valuation of SMS's Shares. In the current equity market environment, the SMS
Board believes that the terms of the Acquisition represent attractive value
relative to the risk of ongoing volatility in capital markets;
· that the risks and uncertainties of the current market
environment, including the prevailing global economic and geopolitical
uncertainty, may increase the execution risk associated with the execution of
SMS's growth strategy;
· that the constraints imposed by the public capital markets place
the Company at a competitive disadvantage when compared with comparable
businesses;
· that, in light of the valuation of SMS's listed Shares, raising
significant capital from the public market to enable the SMS Group to fulfil
its growth potential beyond the Existing Pipeline would likely be challenging
and dilutive to shareholder value; and
· that, based on the statements and assurances made by Bidco
regarding its intentions for the business (as set out in more detail in
paragraph 9 below), KKR fully supports SMS's current strategy and management,
which the SMS Board believes will provide both access to capital for further
growth and continuity for SMS's customers, employees and other stakeholders.
Accordingly, having taken into account all of the above factors, the SMS
Directors intend unanimously to recommend the Acquisition to SMS Shareholders.
6 Irrevocable undertakings
As described above, Bidco has received irrevocable undertakings from the SMS
Directors who hold interests in SMS Shares to vote in favour of the Scheme at
the Court Meeting and the Special Resolutions to be proposed at the SMS
General Meeting (or, if Bidco, with the consent of the Panel, subsequently
structures the Acquisition as a Takeover Offer, to accept any Takeover Offer
made by Bidco in accordance with the terms of the irrevocable undertaking) in
respect of those SMS Shares that they legally and/or beneficially hold which
are under their control, in aggregate, representing approximately 0.1 per
cent. of SMS's issued ordinary share capital on the Latest Practicable Date.
Further details of the irrevocable undertakings described above are set out in
Appendix III to this Announcement.
7 Information on Bidco and KKR
Bidco is a newly formed company indirectly wholly-owned by funds advised by
KKR. KKR is a leading global investment firm that offers alternative asset
management as well as capital markets and insurance solutions, with
approximately US$528 billion in assets under management as of 30 September
2023. KKR aims to generate attractive investment returns by following a
patient and disciplined investment approach, employing world-class people, and
supporting growth in its portfolio companies and communities.
KKR has 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 that are fully dedicated to
Infrastructure. The firm has made over 80 infrastructure investments spanning
the globe across various sectors including renewables, utilities, midstream,
transportation, water and communications. Its portfolio companies have assets
across many geographies, including the US, Canada, Mexico, Germany, France,
Spain, and the UK, amongst others.
KKR will invest in the Acquisition largely through KKR Global Infrastructure
Investors IV (the "Fund"), a US$17 billion fund focused on critical
infrastructure investments with low volatility and strong downside protection
where KKR believes it can achieve attractive risk-adjusted returns by
leveraging its experienced team, risk-based strategy, long track record of
operational value creation, and global network of industry experts. The Fund
has a broad investment mandate across a number of infrastructure sectors and
predominantly pursues assets with strong existing cash flows and attractive
reinvestment opportunities for future growth.
KKR has a long track record in energy transition and climate-related
investments. Since launching the KKR Infrastructure Platform in 2008, KKR has
committed more than $15 billion to energy transition and climate-related
investments. KKR has been investing in the UK for over two decades, having
deployed over $24 billion in equity across all investment platforms, including
over $5.5 billion in infrastructure sustainability-related investments over
the past seven years.
8 Information on the SMS Group
SMS was incorporated in Scotland in October 2009 and the SMS Shares were
admitted to trading on AIM on 8 July 2011.
SMS is a fully integrated energy infrastructure company owning and managing
meter assets, energy data, grid-scale batteries and other carbon reduction
(CaRe) assets. The group manages and optimises these assets through its
in-house technology and data analytical platform "METIS".
Established in 1995, 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.
Since its IPO, SMS has grown to become one of the UK leaders in smart energy
assets and related data services. SMS provides a fully-integrated offering, as
an end-to-end installer, owner and operator of smart energy assets, including
smart meters, grid-scale battery storage systems, electric vehicle chargers
and other behind the meter assets such as solar, storage and heat pumps. Its
solutions are widely used across a number of settings, primarily industrial,
commercial and public sectors and the wider domestic market.
SMS is one of the leaders in the low carbon, smart energy revolution in the UK
and is committed to reducing its own carbon emissions to net zero by 2030. SMS
has been recognised with the London Stock Exchange's Green Economy Mark every
year since it was introduced in 2019.
SMS is headquartered in Glasgow with a presence across over eight locations.
SMS is quoted on AIM.
SMS employs approximately 1,500 people, primarily in the UK, and for the
financial year ended 31 December 2022, SMS reported Pre-exceptional EBITDA of
£63.8 million and Underlying Profit Before Tax of £24.5 million. At 31
December 2022 SMS had index-linked annualised recurring revenue (ILARR) of
£97.1 million.
At 30 June 2023 SMS reported ILARR of £110.0 million. For the six month
period ended 30 June 2023, SMS reported Pre-exceptional EBITDA of £36.1
million and Underlying Profit Before Tax of £11.2 million.
9 Directors, management, employees, research and development and
locations
Bidco's strategic plans for SMS
As set out in paragraph 3 (Background to and reasons for the Acquisition),
Bidco believes that the Acquisition represents an attractive opportunity to
support SMS in the next phase of its growth.
Bidco is supportive of SMS's publicly stated strategy of delivering and
growing its smart meter and grid-scale battery pipelines and building the
pipeline in wider carbon reduction assets. Bidco intends to provide capital,
access to its global network and operational expertise to support SMS's
strategy under private ownership. Bidco believes that its support will allow
SMS to deliver on its growth agenda underpinned by its focus on serving its
customers and protecting the environment.
In line with market practice for a public offer process, Bidco completed a
period of confirmatory due diligence on SMS prior to the date of this
Announcement; however, Bidco has not yet had access to sufficiently detailed
operational information to formulate an agreed strategy for SMS. Following the
Scheme becoming Effective, Bidco intends to conduct, together with the
management team, a detailed review of SMS's business and operations, and
expects that the review will be completed within approximately twelve months
from the Effective Date. The review will include:
· assessing SMS's existing portfolio of carbon reduction assets,
its asset pipeline and embedded growth opportunities;
· identifying and executing acquisition and development
opportunities;
· assessing opportunities to leverage SMS's technology platforms to
enable a smart, data-driven, energy system underpinning SMS's focus on
decarbonisation; and
· assessing SMS's capital structure and ongoing capital
requirements with a view to maximising the opportunities available to SMS.
Employees, management and pensions
Bidco attaches great importance to the skills and experience of SMS's
management and employees and recognises that the employees and management of
SMS will be key to its future success. Bidco is looking forward to working
with SMS's management and employees to support the future development of SMS
and to ensure that the business continues to thrive as a private company.
Once SMS ceases to be a publicly-listed company, Bidco intends that there will
be limited headcount reductions related to public company-related functions
which will no longer be required under private ownership. Bidco will seek to
reassign individuals involved in these functions where possible and will
comply with applicable law (including any information and consultation
obligations) in connection with any headcount reductions. Bidco expects that,
upon the Scheme becoming Effective, the Chairman and each of the non-executive
directors on the SMS Board will resign from his or her office as a director of
SMS and for the Board's committees to be disbanded.
Other than as described above, Bidco does not intend to make any other
material reductions to the SMS employee headcount.
Following completion of the Acquisition, Bidco confirms that it will fully
safeguard the existing contractual and statutory employment rights, including
pension rights, of all management and employees of SMS in accordance with
applicable law, and envisages that there will be no material change in their
terms and conditions of employment or in the balance of their skills and
functions.
Locations, headquarters and fixed assets
Bidco has no plans to change the locations of SMS's headquarters, headquarter
functions (other than as outlined in the section above) or places of business
or to redeploy the fixed assets of SMS.
Research and development
Bidco does not intend to make any changes to SMS's research and development
functions.
Trading facilities
SMS Shares are currently admitted to trading on AIM and, as set out in
paragraph 14 below, subject to the Scheme becoming Effective, an application
will be made to the London Stock Exchange to cancel the admission to trading
of SMS Shares on AIM.
Management incentivisation
As noted above, Bidco attaches great importance to the skills, experience and
expertise of the existing employees of SMS. At this stage, Bidco has not
entered into, and has not discussed any form of, incentivisation arrangements
with members of SMS's management. Bidco expects to put in place certain
incentive arrangements for the management of SMS and for the retention of key
employees, in each case following the Effective Date.
No statements in this paragraph 9 constitute "post-offer undertakings" for the
purpose of Rule 19.5 of the Code.
10 SMS Share Plans
Participants in the SMS Share Plans will be contacted regarding the effect of
the Acquisition on their rights under the SMS Share Plans and, where required,
appropriate proposals in accordance with Rule 15 of the Takeover Code will be
made to such participants in due course. Further details of the terms of such
proposals will be included in the Scheme Document and in separate letters to
be sent to participants in the SMS Share Plans.
11 Financing
Bidco is providing the cash consideration payable under the Acquisition
through a combination of equity and debt financing.
The financing will comprise:
· equity to be drawn from funds, vehicles and/or accounts advised
and/or managed by KKR; and
· a term loan to be provided through an interim facilities
agreement between Bidco and certain interim lenders (the "Interim Lenders").
Other potential investors may take indirect minority interests in Bidco during
the offer period or once the Acquisition completes.
Morgan Stanley, as financial adviser to Bidco, is satisfied that sufficient
cash resources are available to Bidco to enable it to satisfy in full the cash
consideration payable to SMS Shareholders under the terms of the Acquisition.
Further information on the financing of the Acquisition will be set out in the
Scheme Document.
12 Acquisition-related Arrangements
Confidentiality Agreement
Kohlberg Kravis Roberts & Co. Partners LLP, an affiliate of Kohlberg
Kravis Roberts & Co. L.P., and SMS entered into a confidentiality
agreement on 14 October 2023 (the "Confidentiality Agreement"), pursuant to
which KKR has undertaken to keep information relating to SMS confidential and
not to disclose it to third parties (other than to permitted recipients)
unless required by law or regulation. These confidentiality obligations shall
remain in force until the earlier of completion of the Acquisition or two
years from the date of the Confidentiality Agreement.
The Confidentiality Agreement also contains undertakings from KKR that, for a
period ending on the earlier of the last day of the eighteenth month following
the date of Confidentiality Agreement and completion of the Acquisition, KKR
shall not solicit, employ or otherwise engage certain of SMS's employees or
officers without the prior written consent of SMS.
The Confidentiality Agreement includes customary provisions relating to
restrictions on share dealings.
Clean Team Agreement
Kohlberg Kravis Roberts & Co. Partners LLP and SMS entered into a clean
team agreement on 16 November 2023 (the "Clean Team Agreement"), the purpose
of which is to stipulate the procedure for the sharing of commercially
sensitive information relating to the SMS Group with identified external legal
advisers, consultants and experts hired by KKR in connection with: (i)
undertaking commercial and legal due diligence in order to evaluate the
Acquisition; (ii) planning the transition and integration process in relation
to the Acquisition; and (iii) undertaking the analysis of regulatory clearance
matters (including antitrust and investment screening approvals) and
undertaking the relevant regulatory processes (including the preparation of
antitrust or other regulatory filings and communications) with any relevant
regulatory authority as required in the context of the Acquisition.
Co-operation Agreement
Bidco and SMS entered into a co-operation agreement on 7 December 2023 (the
"Co-operation Agreement"), pursuant to which, among other things: (i) Bidco
has agreed to take all required or necessary steps to promptly obtain the
clearances and approvals necessary and/or expedient to satisfy certain
regulatory conditions as soon as reasonably practicable and in any event, in
sufficient time to enable the Effective Date to occur by the Long Stop Date;
(ii) Bidco and SMS have agreed to certain undertakings to co-operate in
relation to such clearances and approvals; (iii) Bidco has agreed to provide
SMS with certain information for the purposes of the Scheme Document and to
otherwise assist SMS with the preparation of the Scheme Document; (iv) Bidco
has agreed to take all such steps as are permissible by the Code and
applicable law and are within its power that are necessary to implement the
Acquisition in accordance with, and subject to the Code and the terms and
conditions set out in, the Co-operation Agreement, this Announcement and the
Scheme Document; (v) Bidco and SMS have agreed to certain provisions if the
Scheme should switch to a Takeover Offer. The Co-operation Agreement also
contains provisions that will apply in respect of employee-related matters and
the SMS Share Plans.
The Co-operation Agreement can be terminated in a number of customary
circumstances, including (subject to certain exceptions): (i) if Bidco and SMS
agree in writing to terminate the Co-operation Agreement; (ii) if the
Effective Date has not occurred on or before the Long Stop Date; (iii) if,
prior to the Long Stop Date, any Condition becomes incapable of satisfaction
(in circumstances where the invocation of the relevant Condition is permitted
by the Panel); (iv) at Bidco's election, if the SMS Directors withdraw,
adversely modify or qualify the recommendation provided in this Announcement
or, if the SMS Directors recommend a competing proposal; or (v) if the
Acquisition, with the permission of the Panel, is withdrawn or lapses in
accordance with its terms prior to the Long Stop Date (other than in certain
limited circumstances).
13 Structure of and Conditions to the Acquisition
It is intended that the Acquisition will be effected by means of a
Court-approved scheme of arrangement between SMS and Scheme Shareholders under
Part 26 of the Companies Act.
The purpose of the Scheme is to provide for Bidco to become the holder of the
entire issued and to be issued ordinary share capital of SMS. This is to be
achieved by:
(i) the transfer of the Scheme Shares to Bidco, in
consideration for which the Scheme Shareholders who are on the register of
members at the Scheme Record Time will receive cash consideration on the basis
set out in paragraph 2 of this Announcement; and
(ii) passing of the Special Resolutions at the SMS General
Meeting (including amendments to SMS's Articles to ensure that any SMS Shares
issued or transferred out of treasury between the approval of the Special
Resolutions at the SMS General Meeting and the Scheme Record Time will be
subject to the Scheme and that any SMS Shares issued or transferred after the
Scheme Record Time will automatically be acquired by Bidco).
The Acquisition will be subject to the Conditions and further terms set out in
Appendix I to this Announcement and to be set out in the Scheme Document and
the associated forms of proxy and will only become Effective if, among other
things, the following events occur on or before the Long Stop Date:
(i) the approval of the Scheme by a majority in number of the
SMS Shareholders who are present, entitled to vote, and vote, whether in
person or by proxy, at the Court Meeting and who represent 75 per cent. or
more in value of the SMS Shares voted by those SMS Shareholders at the Court
Meeting;
(ii) the Special Resolutions required to approve and implement
the Scheme being duly passed by 75 per cent. or more of votes cast at the SMS
General Meeting;
(iii) following the Scheme being approved at the Court Meeting and
the Special Resolutions being passed at the SMS General Meeting, the sanction
of the Scheme by the Court (with or without modification but subject to any
modification being on terms acceptable to SMS and Bidco); and
(iv) following the sanction of the Scheme by the Court, the
delivery of a copy of the Court Order to the Registrar of Companies.
The Acquisition will lapse if:
· the Court Meeting and the SMS General Meeting are not held on or
before the 22(nd) day after the expected date of such meetings as set out in
the Scheme Document in due course (or such later date as may be agreed between
Bidco and SMS and that the Court may approve if required);
· the Sanction Hearing is not held on or before the 22(nd) day after
the date of such hearing as set out in the Scheme Document (or such later date
as may be agreed between Bidco and SMS and that the Court may approve if
required); or
· the Scheme does not become Effective on or before the Long Stop Date,
provided however that the deadlines for the timing of the Court Meeting, the
SMS General Meeting and the Sanction Hearing as set out above may be waived by
Bidco, and the Long Stop Date may, with the approval of the Court and/or the
Panel if required, be extended by agreement between SMS and Bidco.
Upon the Scheme becoming Effective, it will be binding on all Scheme
Shareholders, irrespective of whether or not they attended or voted at the
Court Meeting or the SMS General Meeting and, if they did vote, irrespective
of whether or not they voted for or against the Scheme or the resolutions
proposed at those meetings.
In accordance with the applicable provisions of the Takeover Code, the
consideration for the transfer of the Scheme Shares to Bidco will be
despatched no later than 14 days after the Effective Date.
Any SMS Shares issued before the Scheme Record Time which remain in issue at
the Scheme Record Time will be subject to the terms of the Scheme. The Special
Resolutions to be proposed at the SMS General Meeting will, among other
things, provide that the Articles be amended to incorporate provisions
requiring, among other things and subject to the Scheme becoming Effective,
any SMS Shares issued or transferred after the Scheme Record Time (other
than to Bidco and/or its nominees) to be automatically transferred to Bidco
(or as Bidco may direct) on the same terms as the Acquisition (other than
terms as to timings and formalities). The provisions of the Articles (as
amended) will avoid any person (other than Bidco, its nominees and any person
to whom Bidco may direct the transfer of SMS Shares after the Effective Date)
holding and retaining SMS Shares after the Effective Date.
Further details of the Scheme, including an indicative timetable for its
implementation, will be set out in the Scheme Document. It is expected that
the Scheme Document and the forms of proxy accompanying the Scheme Document
will be published within 28 days of this Announcement (unless otherwise agreed
by the Panel, Bidco and SMS). The Scheme Document and associated forms of
proxy will be made available to all SMS Shareholders at no charge to them,
and, for information only, to persons with information rights and to the
holders of options under the SMS Share Plans.
Subject, among other things, to the satisfaction or waiver of the Conditions,
it is expected that the Scheme will become effective in Q1 2024.
Pursuant to the terms of the Interim Facilities Agreement, Bidco may not
waive, amend or treat as satisfied any material term or condition relating to
the Acquisition where to do so would be materially adverse to the interests of
the Interim Lenders (taken as a whole) under the Interim Facilities Agreement,
subject to certain exceptions, including where it is reasonably determined by
Bidco as being necessary or desirable to comply with the requirements or
requests of the Takeover Code, the Panel or the Court or any applicable law,
regulation or regulatory body.
14 Cancellation of admission to trading on AIM and re-registration
Prior to the Scheme becoming Effective, an application will be made to the
London Stock Exchange for the admission of the SMS Shares to trading on AIM to
be cancelled shortly after the Effective Date (but in any event after the
Scheme becomes Effective).
The last day of dealings in SMS Shares on AIM is expected to be the Business
Day immediately prior to the Effective Date and no transfers will be
registered after 6.00 p.m. (London time) on that date.
On the Effective Date, share certificates held by Scheme Shareholders in
respect of Scheme Shares shall cease to be valid and should be destroyed. In
addition, entitlements to SMS Shares held in CREST shall be cancelled on the
Effective Date.
It is also proposed that, following the Effective Date and after the
cancellation of trading of the SMS Shares on AIM, SMS will be re-registered as
a private limited company under the relevant provisions of the Companies Act.
15 Dividends
SMS Shareholders will be entitled to receive and retain the Second FY 2023
Dividend Instalment of 8.31875 pence per SMS Share as announced by SMS on 12
September 2023, which is expected to be paid on 25 January 2024 to those SMS
Shareholders who appear on the register of members of the Company on 5 January
2024.
If any other dividend or distribution is announced, declared, made or paid in
respect of SMS Shares on or after the date of this Announcement (including the
Third and Fourth FY 2023 Dividend Instalments), Bidco reserves the right to
reduce the Acquisition Price by the amount of such dividend or other
distribution. If any such dividend or distribution is paid after the date of
this Announcement and Bidco exercises its rights described in the preceding
sentence, SMS Shareholders would be entitled to retain any such dividend or
other distribution and any reference in this Announcement to the consideration
payable under the Scheme shall be deemed to be a reference to the
consideration as so reduced.
The Acquisition Price will not be reduced in circumstances where the SMS
Shares are or will be acquired pursuant to the Scheme on a basis which
entitles Bidco to receive a dividend or other distribution in respect of its
SMS Shares after the Scheme has become effective and to retain such dividend
or other distribution.
16 Disclosure of interests in SMS
Save in respect of the irrevocable undertakings referred to in paragraph 6
above, as at the close of business on the Latest Practicable Date, neither
Bidco, nor any of its directors, nor, so far as Bidco is aware, any person
acting, or presumed to be acting, in concert (within the meaning of the
Takeover Code) with it has: (i) any interest in or right to subscribe for any
relevant securities of SMS; (ii) any short positions in respect of relevant
SMS Shares (whether conditional or absolute and whether in the money or
otherwise), including any short positions under a derivative, any agreement to
sell or any delivery obligation or right to require another person to purchase
or take delivery; (iii) any dealing arrangement of the kind referred to in
Note 11 on the definition of acting in concert in the Takeover Code, in
relation to SMS Shares or in relation to any securities convertible or
exchangeable into SMS Shares; (iv) borrowed or lent any relevant SMS Shares
(including, for these purposes, any financial collateral arrangements of the
kind referred to in Note 4 on Rule 4.6 of the Takeover Code), save for any
borrowed shares which had been either on-lent or sold; or (v) procured an
irrevocable undertaking or letter of intent to accept the terms of the
Acquisition in respect of relevant securities in SMS.
'Interests in securities' for these purposes arise, in summary, when a person
has long economic exposure, whether absolute or conditional, to changes in the
price of securities (and a person who only has a short position in securities
is not treated as interested in those securities). In particular, a person
will be treated as having an 'interest' by virtue of the ownership, voting
rights or control of securities, or by virtue of any agreement to purchase,
option in respect of, or derivative referenced to, securities.
Furthermore, save for the irrevocable undertakings described in paragraph 6
above, no arrangement exists between Bidco and SMS or a person acting in
concert with Bidco and SMS in relation to SMS Shares. For these purposes, an
"arrangement" includes any indemnity or option arrangement, and any agreement
or any understanding, formal or informal, of whatever nature, relating to SMS
Shares which may be an inducement to deal or refrain from dealing in such
securities.
It has not been possible for Bidco to make enquiries of all of its concert
parties in advance of the release of this Announcement. Therefore, if Bidco
becomes aware, following the making of such enquiries, that any of its concert
parties have any interests in relevant securities of SMS, all relevant details
in respect of Bidco's concert parties will be included in Bidco's Opening
Position Disclosure in accordance with Rule 8.1(a) and Note 2(a)(i) on Rule 8
of the Takeover Code.
17 General & right to switch to a Takeover Offer
Bidco reserves the right to elect (with the consent of the Panel and subject
to the terms of the Co-operation Agreement) to implement the Acquisition by
way of a Takeover Offer for the entire issued and to be issued share capital
of SMS as an alternative to the Scheme. In such event, the Acquisition shall
be implemented on the same terms or, if Bidco so decides, such other terms
being no less favourable, so far as applicable, as those which would apply to
the Scheme (subject to appropriate amendments, including (without limitation)
an acceptance condition set (subject to the Co-operation Agreement) at a level
permitted by the Panel).
Further, if the Acquisition is effected by way of a Takeover Offer, and if
sufficient acceptances of the Takeover Offer are received and/or sufficient
SMS Shares are otherwise acquired, and the Takeover Offer becomes or is
declared unconditional in all respects, it is the intention of Bidco to apply
the provisions of the Companies Act to acquire compulsorily any outstanding
SMS Shares to which such Takeover Offer relates. The Acquisition will be made
subject to the Conditions and further terms set out in Appendix I to this
Announcement and to the full terms and conditions which will be set out in the
Scheme Document and forms of proxy. The bases and sources of certain financial
information contained in this Announcement are set out in Appendix II to this
Announcement. A summary of the irrevocable undertakings given in relation to
the Acquisition is contained in Appendix III to this Announcement. Certain
terms used in this Announcement are defined in Appendix IV to this
Announcement.
Morgan Stanley, Macquarie Capital, Cavendish, Investec and RBC have each given
and not withdrawn their consent to the publication of this Announcement with
the inclusion herein of the references to their names in the form and context
in which they appear.
18 Documents available on website
Copies of the following documents shall be made available by no later than 12
noon (London time) on the Business Day following the date of this Announcement
on SMS's website at www.sms-plc.com/ (http://www.sms-plc.com/) until the end
of the Acquisition:
· this Announcement;
· the irrevocable undertakings listed in Appendix III to this
Announcement;
· the Co-operation Agreement;
· the Confidentiality Agreement;
· the Clean Team Agreement;
· documents relating to the financing of the Acquisition referred
to in paragraph 11 above; and
· consent letters from each of Morgan Stanley, Macquarie Capital,
Cavendish, Investec and RBC.
Enquiries:
Morgan Stanley (Joint Financial Adviser to KKR) +44 (0) 20 7425 8000
Shirav Patel / Francesco Puletti / Andrew Foster / George Chalaris / Nagib
Ahmad
Macquarie Capital (Joint Financial Adviser to KKR) +44 (0) 20 3037 2000
Adam Hain / Ashish Mehta
FGS Global (PR Adviser to KKR) KKR-LON@fgsglobal.com
Faeth Birch / Alastair Elwen / Sophia Johnston +44 (0) 20 725 13801
Smart Metering Systems plc +44 (0) 141 249 3850
Miriam Greenwood, Chairman
Tim Mortlock, Chief Executive Officer
Gail Blain, Chief Financial Officer
Dilip Kejriwal, Head of Investor Relations
RBC Capital Markets (Joint Financial Adviser and Joint Broker to SMS) +44 (0) 20 7653 4000
Mark Preston / Evgeni Jordanov / Matthew Coakes / Sam Jackson
Investec Bank plc (Joint Financial Adviser and Joint Broker to SMS) +44 (0) 20 7597 5970
Henry Reast / James Rudd / Shalin Bhamra
Cavendish Securities plc (Nomad and Joint Broker to SMS) +44 (0) 131 220 6939
Neil McDonald / Peter Lynch / Adam Rae
Instinctif Partners (Public Relations Adviser to SMS) sms@instinctif.com (mailto:sms@instinctif.com)
Tim Linacre +44 (0) 7949 939 237
Guy Scarborough +44 (0) 7917 178 920
Hogan Lovells International LLP is acting as legal adviser to SMS in
connection with the Acquisition. Simpson Thacher & Bartlett LLP is acting
as legal adviser to KKR and Bidco. Burness Paull LLP are providing legal
advice to SMS as to Scottish law.
Important Notices
RBC Europe Limited (trading as RBC Capital Markets), which is authorised by
the Prudential Regulation Authority and regulated by the Financial Conduct
Authority and the Prudential Regulation Authority in the United Kingdom, is
acting for SMS and no one else in connection with the matters referred to in
this announcement and will not be responsible to anyone other than SMS for
providing the protections afforded to clients of RBC Capital Markets, or for
providing advice in connection with matters referred to in this announcement
Investec, which is authorised by the Prudential Regulation Authority (the
"PRA") and regulated by the Financial Conduct Authority and PRA in the United
Kingdom, is acting exclusively as financial adviser to SMS and for no one else
in connection with the Offer and will not be responsible to any person other
than SMS for providing the protections afforded to clients of Investec, nor
for providing advice in relation to the Offer, the content of this
announcement or any matter referred to in this announcement. Neither Investec
nor any of its subsidiaries, branches or affiliates owes or accepts any duty,
liability or responsibility whatsoever (whether direct or indirect, whether in
contract, in tort, under statute or otherwise) to any person who is not a
client of Investec in connection with this announcement, any statement
contained herein or otherwise.
Cavendish Securities, which is authorised and regulated in the United Kingdom
by the Financial Conduct Authority, is acting exclusively for SMS and no one
else in connection with the subject matter of this Announcement and will not
be responsible to anyone other than SMS for providing the protections afforded
to clients of Cavendish Securities or for providing advice in relation to the
subject matter of this Announcement, the contents of this Announcement and any
other matters referred to in this Announcement.
Morgan Stanley & Co. International plc ("Morgan Stanley") which is
authorised by the Prudential Regulation Authority and regulated by the
Financial Conduct Authority and the Prudential Regulation Authority in the UK
is acting as financial adviser exclusively for KKR and no one else in
connection with the matters set out in this announcement. In connection with
such matters, Morgan Stanley, its affiliates and their respective directors,
officers, employees and agents will not regard any other person as their
client, nor will they be responsible to any other person for providing the
protections afforded to their clients or for providing advice in connection
with the contents of this announcement or any other matter referred to herein.
Macquarie Capital (Europe) Limited ("Macquarie Capital") which is regulated by
the Financial Conduct Authority in the UK is acting as financial adviser
exclusively for KKR and no one else in connection with the matters set out in
this announcement. In connection with such matters, Macquarie Capital, its
affiliates and their respective directors, officers, employees and agents will
not regard any other person as their client, nor will they be responsible to
any other person for providing the protections afforded to their clients or
for providing advice in connection with the contents of this announcement or
any other matter referred to herein. Macquarie Capital (Europe) Limited is not
an authorised deposit-taking institution for the purposes of the Banking Act
1959 (Commonwealth of Australia), and its obligations do not represent
deposits or other liabilities of Macquarie Bank Limited ABN 46 008 583 542.
Any investments are subject to investment risk including possible delays in
repayment and loss of income and principal invested. Macquarie Bank Limited
does not guarantee or otherwise provide assurance in respect of the
obligations of Macquarie Capital (Europe) Limited.
Further Information
This Announcement is for information purposes only and does not constitute or
form any part of an offer to sell or subscribe for or an invitation to
purchase or subscribe for any securities or the solicitation of an offer to
buy any securities, pursuant to the Acquisition or otherwise. The Acquisition
shall be made solely by means of the Scheme Document (or, if, with the consent
of the Panel, the Acquisition is implemented by way of a Takeover Offer, any
document by which the Acquisition is made) which, together with the Forms of
Proxy (or forms of acceptance), shall contain the full terms and Conditions of
the Acquisition, including details of how to vote in respect of the
Acquisition. SMS Shareholders are strongly advised to read the formal
documentation in relation to the Acquisition once it has been despatched. Each
SMS Shareholder is urged to consult its independent professional adviser
immediately regarding the tax consequences to it (or its beneficial owners) of
the Acquisition.
The statements contained in this Announcement are made as at the date of this
Announcement, unless some other time is specified in relation to them, and
publication of this Announcement shall not give rise to any implication that
there has been no change in the facts set forth in this Announcement since
such date.
This Announcement has been prepared for the purpose of complying with English
and Scots law and the Takeover Code and the information disclosed may not be
the same as that which would have been disclosed if this Announcement had been
prepared in accordance with the laws of jurisdictions outside of England and
Scotland.
This Announcement does not constitute a prospectus or prospectus equivalent
document.
Overseas Shareholders
The release, publication or distribution of this Announcement in or into
certain jurisdictions other than the United Kingdom may be restricted by law.
Persons who are not resident in the United Kingdom should inform themselves
of, and observe, any applicable requirements.
Unless otherwise determined by Bidco or required by the Takeover Code, and
permitted by applicable law and regulation, the Acquisition shall not be made
available, directly or indirectly, in, into or from a Restricted Jurisdiction
where to do so would violate the laws in that jurisdiction and no person may
vote in favour of the Acquisition by any such use, means, instrumentality or
form within a Restricted Jurisdiction or any other jurisdiction if to do so
would constitute a violation of the laws of that jurisdiction. Accordingly,
copies of this Announcement and all documents relating to the Acquisition are
not being, and must not be, directly or indirectly, mailed or otherwise
forwarded, distributed or sent in, into or from a Restricted Jurisdiction
where to do so would violate the laws in that jurisdiction, and persons
receiving this Announcement and all documents relating to the Acquisition
(including custodians, nominees and trustees) must not mail or otherwise
distribute or send them in, into or from such jurisdictions where to do so
would violate the laws in that jurisdiction. Doing so may render invalid any
related purported vote in respect of the Acquisition.
The availability of the Acquisition to SMS Shareholders who are not resident
in the United Kingdom (and, in particular, their ability to vote their SMS
Shares with respect to the Scheme at the Court Meeting, or to appoint another
person as proxy to vote at the Court Meeting on their behalf) may be affected
by the laws of the relevant jurisdictions in which they are resident. Persons
who are not resident in the United Kingdom should inform themselves of, and
observe, any applicable requirements, as any failure to comply with such
requirements may constitute a violation of the securities laws of any such
jurisdiction. To the fullest extent permitted by applicable law, the companies
and persons involved in the Acquisition disclaim any responsibility or
liability for the violation of such restrictions by any person.
The Acquisition shall be subject to the applicable requirements of the
Takeover Code, the Panel, the London Stock Exchange and the Financial Conduct
Authority. Further details in relation to Overseas Shareholders will be
contained in the Scheme Document.
Additional Information for US Investors
The Acquisition is being made to acquire the securities of a Scottish company
by means of a scheme of arrangement provided for under Scots law. A
transaction effected by means of a scheme of arrangement is not subject to the
tender offer or proxy solicitation rules under the US Exchange Act.
Accordingly, the Scheme will be subject to disclosure requirements and
practices applicable in the United Kingdom to schemes of arrangement, which
are different from the disclosure requirements of the US tender offer and
proxy solicitation rules. Certain financial information included in this
Announcement and the Scheme documentation has been or will have been prepared
in accordance with accounting standards applicable in the United Kingdom and
thus may not be comparable to financial information of US companies or
companies whose financial statements are prepared in accordance with generally
accepted accounting principles in the US. If Bidco were to elect to implement
the Acquisition by means of a Takeover Offer, such Takeover Offer would be
made in compliance with applicable US laws and regulations, including Section
14(e) of the US Exchange Act and Regulation 14E thereunder. Such a takeover
would be made in the United States by Bidco and no one else.
The receipt of cash pursuant to the Acquisition by a US SMS Shareholder as
consideration for the transfer of its SMS Shares pursuant to the Scheme will
likely be a taxable transaction for United States federal income tax purposes
and under applicable United States state and local, as well as foreign and
other, tax laws. SMS Shareholders are urged to consult their independent
professional advisers immediately regarding the tax consequences of the
Acquisition applicable to them.
It may be difficult for US SMS Shareholders to enforce their rights and claims
arising out of the US federal securities laws, since Bidco and SMS are located
in countries other than the US, and some or all of their officers and
directors may be residents of countries other than the US. US SMS Shareholders
may not be able to sue a non-US company or its officers or directors in a
non-US court for violations of US securities laws. Further, it may be
difficult to compel a non-US company and its affiliates to subject themselves
to a US court's jurisdiction and judgement.
In accordance with normal UK practice and pursuant to Rule 14e-5(b) of the US
Exchange Act, Bidco, certain affiliated companies and their nominees or
brokers (acting as agents) may make certain purchases of, or arrangements to
purchase, shares in SMS outside of the US, other than pursuant to the
Acquisition, until the date on which the Acquisition and/or Scheme becomes
Effective, lapses or is otherwise withdrawn. Also, in accordance with Rule
14e-5(b) of the US Exchange Act, each of Morgan Stanley, Macquarie Capital,
Investec and RBC will continue to act as a connected exempt principal trader
in SMS Shares on the London Stock Exchange. If such purchases or arrangements
to purchase were to be made they would occur either in the open market at
prevailing prices or in private transactions at negotiated prices and comply
with applicable law, including the US Exchange Act. Any information about such
purchases or arrangements to purchase will be disclosed as required in the
United Kingdom, will be reported to a Regulatory Information Service and will
be available on the London Stock Exchange website at
http://www.londonstockexchange.com (http://www.londonstockexchange.com) .
Forward Looking Statements
This Announcement (including information incorporated by reference in this
Announcement), oral statements made regarding the Acquisition, and other
information published by KKR, Bidco or SMS may contain statements about Bidco
and SMS that are or may be deemed to be forward looking statements. All
statements other than statements of historical facts included in this
Announcement may be forward looking statements. Without limitation, any
statements preceded or followed by or that include the words "targets",
"plans", "believes", "expects", "aims", "intends", "will", "may", "shall",
"should", "anticipates", "estimates", "projects", "is subject to", "budget",
"scheduled", "forecast" or words or terms of similar substance or the negative
thereof, are forward looking statements. Forward looking statements include
statements relating to the following: (i) future capital expenditures,
expenses, revenues, earnings, synergies, economic performance, indebtedness,
financial condition, dividend policy, losses and future prospects;
(ii) business and management strategies and the expansion and growth of
Bidco's or SMS's operations and potential synergies resulting from the
Acquisition; and (iii) the effects of government regulation on Bidco's or
SMS's business.
Such forward looking statements are prospective in nature and are not based on
historical facts, but rather on current expectations and projections of the
management of Bidco and SMS about future events, and are therefore subject to
risks and uncertainties that could significantly affect expected results and
are based on certain key assumptions. Many factors could cause actual results
to differ materially from those projected or implied in any forward looking
statements, including: increased competition, the loss of or damage to one or
more key customer relationships, changes to customer ordering patterns, delays
in obtaining customer approvals for engineering or price level changes, the
failure of one or more key suppliers, the outcome of business or industry
restructuring, the outcome of any litigation, changes in economic conditions,
currency fluctuations, changes in interest and tax rates, changes in raw
material or energy market prices, changes in laws, regulations or regulatory
policies, developments in legal or public policy doctrines, technological
developments, the failure to retain key management, or the timing and success
of future acquisition opportunities or major investment projects. Other
unknown or unpredictable factors could cause actual results to differ
materially from those in the forward looking statements. Such forward looking
statements should therefore be construed in the light of such factors. Neither
Bidco nor SMS, nor any of their respective associates or directors, officers
or advisers, provides any representation, assurance or guarantee that the
occurrence of the events expressed or implied in any forward looking
statements in this Announcement will actually occur. Due to such uncertainties
and risks, readers are cautioned not to place undue reliance on such forward
looking statements, which speak only as of the date hereof. All subsequent
oral or written forward looking statements attributable to any member of the
Bidco Group or the SMS Group, or any of their respective associates,
directors, officers, employees or advisers, are expressly qualified in their
entirety by the cautionary statement above.
Bidco and SMS expressly disclaim any obligation to update any forward looking
or other statements contained herein, except as required by applicable law or
by the rules of any competent regulatory authority, whether as a result of new
information, future events or otherwise.
No Profit Forecasts or Profit Estimates or Quantified Financial Benefit
Statements
No statement in this Announcement is intended as, or is to be construed as, a
profit forecast, profit estimate or quantified financial benefit statement for
any period and no statement in this Announcement should be interpreted to mean
that earnings or earnings per share for SMS for the current or future
financial years would necessarily match or exceed the historical published
earnings or earnings per share for SMS.
Disclosure Requirements of the Takeover Code
Under Rule 8.3(a) of the Takeover Code, any person who is interested in 1 per
cent. or more of any class of relevant securities of an offeree company or of
any securities exchange offeror (being any offeror other than an offeror in
respect of which it has been announced that its offer is, or is likely to be,
solely in cash) must make an Opening Position Disclosure following the
commencement of the Offer Period and, if later, following the announcement in
which any securities exchange offeror is first identified. An Opening Position
Disclosure must contain details of the person's interests and short positions
in, and rights to subscribe for, any relevant securities of each of (i) the
offeree company and (ii) any securities exchange offeror(s). An Opening
Position Disclosure by a person to whom Rule 8.3(a) applies must be made by no
later than 3.30 p.m. (London time) on the 10th Business Day following the
commencement of the Offer Period and, if appropriate, by no later than 3.30
p.m. (London time) on the 10th Business Day following the announcement in
which any securities exchange offeror is first identified. Relevant persons
who deal in the relevant securities of the offeree company or of a securities
exchange offeror prior to the deadline for making an Opening Position
Disclosure must instead make a Dealing Disclosure.
Under Rule 8.3(b) of the Takeover Code, any person who is, or becomes,
interested in 1 per cent. or more of any class of relevant securities of the
offeree company or of any securities exchange offeror must make a Dealing
Disclosure if the person deals in any relevant securities of the offeree
company or of any securities exchange offeror. A Dealing Disclosure must
contain details of the dealing concerned and of the person's interests and
short positions in, and rights to subscribe for, any relevant securities of
each of (i) the offeree company and (ii) any securities exchange offeror, save
to the extent that these details have previously been disclosed under Rule 8.
A Dealing Disclosure by a person to whom Rule 8.3(b) applies must be made by
no later than 3.30 p.m. (London time) on the Business Day following the date
of the relevant dealing.
If two or more persons act together pursuant to an agreement or understanding,
whether formal or informal, to acquire or control an interest in relevant
securities of an offeree company or a securities exchange offeror, they will
be deemed to be a single person for the purpose of Rule 8.3.
Opening Position Disclosures must also be made by the offeree company and by
any offeror and Dealing Disclosures must also be made by the offeree company,
by any offeror and by any persons acting in concert with any of them (see
Rules 8.1, 8.2 and 8.4).
Details of the offeree and offeror companies in respect of whose relevant
securities Opening Position Disclosures and Dealing Disclosures must be made
can be found in the Disclosure Table on the Panel's website at
http://www.thetakeoverpanel.org.uk/, including details of the number of
relevant securities in issue, when the Offer Period commenced and when any
offeror was first identified. If you are in any doubt as to whether you are
required to make an Opening Position Disclosure or a Dealing Disclosure, you
should contact the Panel's Market Surveillance Unit on +44 (0)20 7638 0129.
Electronic Communications
Please be aware that addresses, electronic addresses and certain information
provided by SMS Shareholders, persons with information rights and other
relevant persons for the receipt of communications from SMS may be provided to
Bidco during the Offer Period as required under Section 4 of Appendix 4 of the
Takeover Code to comply with Rule 2.11(c) of the Takeover Code.
Publication on Website and Availability of Hard Copies
A copy of this Announcement and the documents required to be published by Rule
26 of the Takeover Code shall be made available subject to certain
restrictions relating to persons resident in Restricted Jurisdictions on SMS's
website at www.sms-plc.com by no later than 12 noon (London time) on the
Business Day following the date of this Announcement. For the avoidance of
doubt, neither the contents of this website nor the content of any other
website accessible from hyperlinks on such website is incorporated into, or
forms part of, this Announcement.
In accordance with Rule 30.3 of the Takeover Code, SMS Shareholders, persons
with information rights and participants in the SMS Share Plans may request a
hard copy of this Announcement by contacting Computershare Investor Services
PLC during business hours on 0370 707 4087 or by submitting a request in
writing to Registrar at Computershare Investor Service PLC, The Pavilions,
Bridgwater Road, Bristol BS99 6ZZ. In accordance with Rule 30.3 of the
Takeover Code, a person so entitled may also request that all future
documents, announcements and information in relation to the Acquisition should
be sent to them in hard copy form. If you have received this Announcement in
electronic form or via a website notification, hard copies of this
Announcement and any document or information incorporated by reference into
this document will not be provided unless such a request is made.
Rounding
Certain figures included in this Announcement have been subjected to rounding
adjustments. Accordingly, figures shown for the same category presented in
different tables may vary slightly and figures shown as totals in certain
tables may not be an arithmetic aggregation of the figures that precede them.
Rule 2.9 Disclosure
In accordance with Rule 2.9 of the Takeover Code, SMS confirms that as at the
date of this Announcement, it has in issue and admitted to trading on AIM
133,606,918 ordinary shares of £0.01 each (excluding ordinary shares held in
treasury). The International Securities Identification Number (ISIN) of the
ordinary shares is GB00B4X1RC86.
General
If you are in any doubt about the contents of this Announcement or the action
you should take, you are recommended to seek your own independent financial
advice immediately from your stockbroker, bank manager, solicitor, accountant
or independent financial adviser duly authorised under FSMA if you are
resident in the United Kingdom or, if not, from another appropriately
authorised independent financial adviser.
APPENDIX I
CONDITIONS AND FURTHER TERMS OF THE SCHEME AND THE ACQUISITION
Part A: Conditions to the Scheme and Acquisition
1. The Acquisition will be conditional upon the Scheme becoming unconditional and becoming Effective, subject to the provisions of the Takeover Code, by no later than 11.59 p.m. (London time) on the Long Stop Date.
Conditions of the Scheme
2. The Scheme will be subject to the following Conditions:
(a) (i) its approval by a majority in number representing not less than 75 per cent. in value of Scheme Shares held by SMS Shareholders who are on the register of members of SMS (or the relevant class or classes thereof) at the Voting Record Time, present, entitled to vote and who vote, whether in person or by proxy, at the Court Meeting and at any separate class meeting which may be required by the Court (or, in each case, any adjournment thereof), and (ii) such Court Meeting being held on or before the 22(nd) day after the expected date of the Court Meeting to be set out in the Scheme Document in due course (or such later date as may be agreed between Bidco and SMS with the consent of the Panel (and that the Court may approve if required));
(b) (i) the Special Resolutions being duly passed by the requisite majority of the SMS Shareholders at the SMS General Meeting (or any adjournment thereof) and (ii) such SMS General Meeting being held on or before the 22(nd) day after the expected date of the SMS General Meeting to be set out in the Scheme Document in due course (or such later date as may be agreed between Bidco and SMS with the consent of the Panel (and that the Court may approve if required)); and
(c) (i) the sanction of the Scheme by the Court (with or without modification (but subject to such modification being acceptable to Bidco and SMS)) and the delivery of a copy of the Court Order to the Registrar of Companies; and (ii) the Sanction Hearing being held on or before the 22(nd) day after the expected date of the Sanction Hearing to be set out in the Scheme Document in due course (or such later date as may be agreed between Bidco and SMS with the Panel (and that the Court may approve if required)).
General Conditions
3. In addition, subject as stated in Part B below and to the requirements of the Panel, Bidco and SMS have agreed that the Acquisition will be conditional upon the following Conditions and, accordingly, the necessary actions to make the Scheme Effective will not be taken unless the following Conditions (as amended if appropriate) have been satisfied or, where relevant, waived:
Other Third Party clearances
(a) no relevant government or governmental, quasi-governmental, supranational, statutory, regulatory, administrative, environmental, professional or investigative body, court, trade agency, association, institution, any entity owned or controlled by any relevant government or state, or any other body or person whatsoever in any jurisdiction (each a "Third Party") having given notice of a decision to take, institute, implement or threaten any action, proceeding, suit, investigation, enquiry or reference (and, in each case, not having withdrawn the same), or having required any action to be taken or otherwise having done anything or having enacted, made or proposed any statute, regulation, decision, order or change to published practice (and, in each case, not having withdrawn the same) and there not continuing to be outstanding any statute, regulation, decision or order which would or might be expected to:
(i) require, prevent or materially delay the divestiture, or materially alter the terms envisaged for any proposed divestiture by any member of the Wider Bidco Group or any member of the Wider SMS Group of all or any portion of their respective businesses, assets or property or impose any limitation on the ability of any of them to conduct their respective businesses (or any of them) or to own, control or manage any of their respective assets or properties or any part thereof which, in each case, is or would be material in the context of the Wider Bidco Group or the Wider SMS Group taken as a whole;
(ii) impose any material limitation on, or result in a material delay in, the ability of any member of the Wider Bidco Group directly or indirectly to acquire or to hold or to exercise effectively, directly or indirectly, all or any rights of ownership in respect of shares or loans or securities convertible into shares or any other securities (or the equivalent) in any member of the Wider SMS Group or to exercise management control over any such member, which, in each case, is or would be material in the context of the Wider Bidco Group or the Wider SMS Group taken as a whole;
(iii) otherwise adversely affect all or any of the business, assets, profits or prospects of any member of the Wider Bidco Group or of any member of the Wider SMS Group to an extent which is, in each case, material in the context of the Wider Bidco Group or the Wider SMS Group taken as a whole;
(iv) make the Acquisition or its implementation or the acquisition or proposed acquisition by Bidco or any member of the Wider Bidco Group of any shares or other securities in, or control of SMS void, illegal, and/or unenforceable under the laws of any relevant jurisdiction, or otherwise, directly or indirectly, restrain, restrict, prevent, prohibit or delay or otherwise adversely interfere with the same, or impose additional conditions or obligations with respect thereto, or otherwise challenge or interfere therewith;
(v) require (other than pursuant to the implementation of the Scheme or, if applicable, sections 974 to 991 of the Companies Act) any member of the Wider Bidco Group or the Wider SMS Group to acquire or to offer to acquire any shares or other securities (or the equivalent) or interest in any member of the Wider SMS Group or the Wider Bidco Group or any asset owned by any third party where such acquisition would, in each case, be material in the context of the Wider Bidco Group or the Wider SMS Group taken as a whole;
(vi) impose any material limitation on or result in any material delay in the ability of any member of the Wider Bidco Group or any member of the Wider SMS Group to conduct, integrate or co-ordinate its business, or any part of it, with the businesses or any part of the businesses of any other member of the Wider Bidco Group and/or the Wider SMS Group in a manner which is material in the context of the Wider SMS Group taken as a whole or in the context of the Acquisition; or
(vii) result in any member of the Wider SMS Group ceasing to be able to carry on business under any name under which it presently does so, to an extent which is material in the context of the Wider SMS Group taken as a whole,
and all applicable waiting and other time periods (including any extensions thereof) during which any such Third Party could decide to take, institute, implement or threaten any such action, proceeding, suit, investigation, enquiry or reference or take any other step under the laws of any jurisdiction in respect of the Acquisition or proposed acquisition of any SMS Shares or otherwise intervene having expired, lapsed, or been terminated;
(b) all filings, applications and/or notifications which are necessary or considered appropriate by Bidco (acting reasonably) having been made in connection with the Acquisition and all relevant waiting periods and other time periods (including any extensions thereof) under any applicable legislation or regulation of any jurisdiction having expired, lapsed or been terminated and all statutory or regulatory obligations in any jurisdiction having been complied with in connection with the Acquisition or the acquisition by any member of the Wider Bidco Group of any shares or other securities in, or control or management of, SMS or any member of the Wider SMS Group or the carrying on by any member of the Wider SMS Group of its business;
(c) all necessary authorisations, orders, recognitions, grants, consents, licences, confirmations, clearances, permissions and approvals (including following a referral to a Member State) for the proposed Acquisition and, except pursuant to Chapter 3 of Part 28 of the Companies Act, the proposed acquisition of any shares or other securities in, or control of, SMS by any member of the Wider Bidco Group having been obtained in terms and in a form reasonably satisfactory to Bidco from all necessary Third Parties or persons with whom any member of the Wider SMS Group has entered into contractual arrangements, and all such authorisations, orders, recognitions, grants, consents, licences, confirmations, clearances, permissions and approvals, together with all authorisations, orders, recognitions, grants, licences, confirmations, clearances, permissions and approvals, which are necessary or appropriate to carry on the business of any member of the Wider SMS Group, remaining in full force and effect and all filings necessary for such purpose have been made and there being no notice or intimation of any intention to revoke, suspend, restrict, modify or not to renew any of the same at the time at which the Acquisition becomes otherwise unconditional and all necessary statutory or regulatory obligations in any jurisdiction having been complied with;
Circumstances arising as a result of any arrangement, agreement etc.
(d) except as Disclosed, there being no provision of any arrangement, agreement, licence, permit, franchise, lease or other instrument to which any member of the Wider SMS Group is a party or by or to which any such member or any of its assets is or may be bound, entitled or be subject or any event or circumstance which, as a consequence of the Acquisition or the proposed acquisition by any member of the Wider Bidco Group of any shares or other securities in SMS or because of a change in the control or management of any member of the Wider SMS Group or otherwise, would reasonably be expected to result in, in each case to an extent which is material in the context of the Wider SMS Group taken as a whole or in the context of the Acquisition:
(i) any monies borrowed by, or any other indebtedness or liabilities, actual or contingent of, or any grant available to, any member of the Wider SMS Group being or becoming repayable, or capable of being declared repayable, immediately or prior to its or their stated maturity date or repayment date, or the ability of any such member to borrow monies or incur any indebtedness being withdrawn or inhibited or being capable of becoming or being withdrawn or inhibited;
(ii) the rights, liabilities, obligations, interests or business of any member of the Wider SMS Group under any such arrangement, agreement, licence, permit, lease or instrument or the interests or business of any member of the Wider SMS Group in or with any other firm or company or body or person (or any agreement or arrangement relating to any such business or interests) being or becoming capable of being terminated or adversely modified or affected or any onerous obligation or liability arising or any action being taken or arising thereunder;
(iii) any member of the Wider SMS Group ceasing to be able to carry on business under any name under which it presently carries on business;
(iv) any assets or interests of any member of the Wider SMS Group being or failing to be disposed of or charged or ceasing to be available to any such member or any right arising under which any such asset or interest could be required to be disposed of or charged or could cease to be available to any member of the Wider SMS Group otherwise than in the ordinary course of business;
(v) the creation, save in the ordinary and usual course of business, or enforcement of any mortgage, charge or other security interest over the whole or any part of the business, property or assets of any member of the Wider SMS Group or any such mortgage, charge or other security interest (whenever created, arising or having arisen), becoming enforceable;
(vi) the financial or trading position or prospects of any member of the Wider SMS Group being prejudiced or adversely affected;
(vii) the creation or acceleration of any liabilities (actual or contingent) by any member of the Wider SMS Group other than trade creditors or other liabilities incurred in the ordinary course of business;
(viii) any liability of any member of the Wider SMS Group to make any severance, termination, bonus or other payment to any of its directors or other officers other than in the ordinary course of business; or
(ix) any requirement of any member of the Wider SMS Group to acquire, subscribe, pay up or repay any shares or other securities (or the equivalent),
and no event having occurred which, under any provision of any such agreement, arrangement, licence, permit or other instrument to which any member of the Wider SMS Group is a party or by or to which any such member or any of its assets may be bound, entitled or subject, would or would reasonably be expected to result in any of the events or circumstances as are referred to in sub-paragraphs (i) to (ix) of this Condition occurring, in each case which is or would be material in the context of the Wider SMS Group taken as a whole, or in the context of the Acquisition;
No material transactions, claims or changes in the conduct of the business of
the Wider SMS Group
(e) except as Disclosed, no member of the Wider SMS Group having since 31 December 2022:
(i) save as between SMS and the Wider SMS Group and/or on or in respect of the grant, exercise or vesting of options or awards granted in the ordinary course under the SMS Share Plans, issued or agreed to issue or authorised or proposed or announced its intention to authorise or propose the issue of additional shares of any class, or securities or securities convertible into, or exchangeable for, or rights, warrants or options to subscribe for or acquire, any such shares or convertible securities or transferred or sold or agreed to transfer or sell or authorised or proposed the transfer or sale of SMS Shares out of treasury;
(ii) recommended, declared, paid or made or proposed or agreed to recommend, declare, pay or make any bonus issue, dividend or other distribution (whether payable in cash or otherwise) other than: (a) to SMS or one of its wholly-owned subsidiaries; and (b) the Second FY 2023 Dividend Instalment;
(iii) save as between SMS and its wholly-owned subsidiaries or between such wholly-owned subsidiaries and other than pursuant to the Acquisition, merged with (by statutory merger or otherwise) or demerged from or acquired any body corporate, partnership or acquired or disposed of, or transferred, mortgaged or charged or created any security interest over, any material assets or any right, title or interest in any material asset or authorised, proposed or announced any intention to do so, in each case other than in the ordinary course of business;
(iv) save as between SMS and its wholly-owned subsidiaries or between such wholly-owned subsidiaries, made, authorised, proposed or announced an intention to propose any change in its loan capital;
(v) issued, authorised, or proposed or announced an intention to authorise or propose the issue of, or made any change in or to the terms of, any debentures or (save in the ordinary course of business and as between SMS and its wholly-owned subsidiaries or between such wholly-owned subsidiaries) incurred or increased any indebtedness or become subject to any contingent liability;
(vi) entered into, varied, authorised or proposed entry into or variation of, or announced its intention to enter into or vary, any material contract, transaction, arrangement or commitment (whether in respect of capital expenditure or otherwise) except in the ordinary course of business which is of a long term, unusual or onerous nature or magnitude, or which is or is likely to be restrictive on the business of any member of the Wider SMS Group or which involves or could reasonably be expected to involve any obligation of such a nature or magnitude, in any such case to an extent which is material in the context of the Wider SMS Group taken as a whole or in the context of the Acquisition;
(vii) entered into, varied, authorised or proposed entry into or variation of, or announced its intention to enter into or vary the terms of or made any offer (which remains open for acceptance) to enter into or vary to a material extent the terms of, any contract, commitment, arrangement or any service agreement with any director or senior executive of the Wider SMS Group (save for salary increases, bonuses or variations of terms in the ordinary course);
(viii) proposed, agreed to provide or modified the terms of any share option scheme, incentive scheme, or other benefit relating to the employment or termination of employment of any employee of the Wider SMS Group and in each case which is material in the context of the Wider SMS Group taken as a whole or in the context of the Acquisition, other than in the ordinary course or in accordance with the terms of the Acquisition or as agreed with the Panel and/or Bidco;
(ix) in relation to any pension scheme or other retirement, leaving service or death benefit arrangement established for any directors, former directors, employees or former employees of any entity in the Wider SMS Group or their dependants and established by a member of the Wider SMS Group (a "Relevant Pension Plan"), made, agreed or consented to or procured any significant change to the basis on which benefits accrue, pensions are payable or the persons entitled to accrue or be paid benefits, under any Relevant Pension Plan which is material in the context of the Wider SMS Group taken as a whole or in the context of the Acquisition, and other than as required in accordance with applicable law;
(x) established or proposed the establishment of any Relevant Pension Plan to the extent which is material in the context of the Wider SMS Group taken as a whole or in the context of the Acquisition, and other than as required in accordance with applicable law;
(xi) entered into, implemented or effected, or authorised the entry into, any joint venture, asset or profit sharing arrangement, partnership or merger of business or corporate entities (other than the Scheme and otherwise than in the ordinary course of business) which in any such case is material in the context of the Wider SMS Group taken as a whole or in the context of the Acquisition;
(xii) purchased, redeemed or repaid or announced any proposal to purchase, redeem or repay any of its own shares or other securities or reduced or, save in respect of the matters mentioned in sub-paragraph (i) above, made any other change to any part of its share capital;
(xiii) other than with respect to claims between SMS and its wholly owned subsidiaries (or between such subsidiaries), waived, compromised or settled any claim which is material in the context of the Wider SMS Group taken as a whole or in the context of the Acquisition;
(xiv) made any alteration to its articles of association or other constitutional documents which is material in the context of the Acquisition (in each case, other than in connection with the Scheme);
(xv) (other than in respect of a member of the Wider SMS Group which is dormant and was solvent at the relevant time) taken or proposed any steps, corporate action or had any legal proceedings instituted or threatened against it in relation to the suspension of payments, a moratorium of any indebtedness, its winding-up (voluntary or otherwise), dissolution, reorganisation or for the appointment of any administrator, receiver, manager, administrative receiver, trustee or similar officer of all or any of its assets or revenues or any analogous proceedings in any jurisdiction or appointed any analogous person in any jurisdiction or had any such person appointed;
(xvi) been unable, or admitted in writing that it is unable, to pay its debts, or having stopped or suspended (or threatened to stop or suspend) payment of its debts generally or ceased or threatened to cease carrying on all or a substantial part of its business which is material in the context of the Wider SMS Group taken as a whole or in the context of the Acquisition;
(xvii) commenced negotiations with or entered into any arrangement with any of its creditors with a view to rescheduling or restructuring any of its indebtedness which, in any such case, is material in the context of the Wider SMS Group taken as a whole or in the context of the Acquisition;
(xviii) entered into any contract, commitment, agreement or arrangement otherwise than in the ordinary course of business or passed any resolution or made any offer (which remains open for acceptance) with respect to or announced an intention to, or to propose to, effect any of the transactions, matters or events referred to in this Condition;
(xix) terminated or varied the terms of any agreement or arrangement between any member of the Wider SMS Group and any other person in a manner which would have a material adverse effect on the financial position of the Wider SMS Group taken as a whole; or
(xx) having taken (or agreed or proposed to take) any action which requires, or would require, the consent of the Panel or the approval of SMS Shareholders in general meeting in accordance with, or as contemplated by, Rule 21.1 of the Takeover Code;
No material adverse change, litigation or regulatory enquiry
(f) since 31 December 2022, and except as Disclosed, there having been:
(i) no adverse change and no circumstances having arisen which would be expected to result in any adverse change in the business, assets, financial or trading position, profits, prospects or operational performance of any member of the Wider SMS Group to an extent which is material to the Wider SMS Group taken as a whole or in the context of the Acquisition;
(ii) no litigation, arbitration proceedings, prosecution or other legal proceedings to which any member of the Wider SMS Group is or may become a party (whether as claimant or defendant or otherwise), and no enquiry, review, investigation or enforcement proceedings by, or complaint or reference to, any Third Party against or in respect of any member of the Wider SMS Group having been threatened, announced or instituted by or against, or remaining outstanding in respect of, any member of the Wider SMS Group, in each case, which is material in the context of the Wider SMS Group taken as a whole or in the context of the Acquisition;
(iii) no contingent or other liability having arisen, increased or become apparent to Bidco other than in the ordinary course of business which is reasonably likely to adversely affect the business, assets, financial or trading position, or profits of any member of the Wider SMS Group, to an extent which is material in the context of the Wider SMS Group taken as a whole;
(iv) no steps having been taken and no omissions having been made which are likely to result in the withdrawal, cancellation, termination or modification of any licence held by any member of the Wider SMS Group, which is necessary for the proper carrying on of its business and the withdrawal, cancellation, termination or modification of which would reasonably be expected to have a material adverse effect on the Wider SMS Group taken as a whole or in the context of the Acquisition; and
(v) no member of the Wider SMS Group having conducted its business in material breach of any applicable laws and regulations which in any case is material in the context of the Wider SMS Group taken as a whole;
(g) except as Disclosed, Bidco not having discovered:
(i) that any financial, business or other information concerning the Wider SMS Group publicly announced and delivered by or on behalf of SMS via a Regulatory Information Service or otherwise or disclosed to any member of the Wider Bidco Group at any time prior to this Announcement by or on behalf of any member of the Wider SMS Group is misleading, contains a misrepresentation of fact or omits to state a fact necessary to make that information not misleading and which was not subsequently corrected before the date of this Announcement by disclosure by or on behalf of the Wider SMS Group through the publication of an announcement via a Regulatory Information Service or otherwise, in any case, which is material in the context of the Wider SMS Group taken as a whole or in the context of the Acquisition; or
(ii) that any member of the Wider SMS Group, otherwise than in the ordinary course of business, is subject to any liability (actual or contingent) and which is not disclosed in the 2022 SMS Annual Report, which is material in the context of the Wider SMS Group taken as a whole or in the context of the Acquisition;
Environmental liabilities
(h) except as Disclosed, Bidco not having discovered, in each case, to an extent which is materially adverse in the context of the Wider SMS Group taken as a whole or in the context of the Acquisition, that:
(i) any past or present member of the Wider SMS Group has failed to comply in any material respect with any applicable legislation or regulations, of any jurisdiction with regard to the use, storage, carriage, disposal, spillage, release, discharge, leak or emission of any waste or hazardous substance or any substance likely to impair materially the environment (including property) or harm human health or otherwise relating to environmental matters or the health and safety of humans, which would be likely to give rise to any material liability (actual or contingent) on the part of any member of the Wider SMS Group; or
(ii) there is, or is likely to be, for that or any other reason whatsoever, any material liability (actual or contingent) of any past or present member of the Wider SMS Group to make good, repair, reinstate or clean up any property now or previously owned, occupied, operated or made use of or controlled by any such past or present member of the Wider SMS Group, under any environmental legislation, regulation, notice, circular or order of any government, governmental, quasi-governmental, state or local government, supranational, statutory or other regulatory body, agency, court, association or any other person or body in any jurisdiction;
Intellectual property
(i) except as Disclosed and since 31 December 2022, no circumstance having arisen or event having occurred in relation to any intellectual property owned or used by any member of the Wider SMS Group which is materially adverse in the context of the Wider SMS Group taken as a whole or in the context of the Acquisition;
Anti-corruption and sanctions
(j) except as Disclosed, Bidco not having discovered that:
(i) any past or present member, director, officer or employee of the Wider SMS Group or any person that performs or has performed services for or on behalf of any such company is or has, at any time engaged in any activity, practice or conduct (or omitted to take any action) in contravention of the UK Bribery Act 2010 and/or the US Foreign Corrupt Practices Act of 1977, as amended or any other applicable anti-corruption legislation;
(ii) any past or present member, director, officer or employee of the Wider SMS Group, or any other person for whom any such person may be liable or responsible, has, engaged in any activity or business with, or made any investments in, or made any funds or assets available to or received any funds or assets from: (a) any government, entity or individual in respect of which United States, United Kingdom or European Union persons, or persons operating in those territories, are prohibited from engaging in activities or doing business, or from receiving or making available funds or economic resources, by United States, United Kingdom or European Union laws or regulations, including the economic sanctions administered by the United States Office of Foreign Assets Control, or HM Treasury; or (b) any government, entity or individual targeted by any of the economic sanctions of the United Nations, the United States, the United Kingdom the European Union or any of its member states, or any other governmental or supranational body or authority in any jurisdiction, except as may have been licensed by the relevant authority; and
(iii) a member of the SMS Group has engaged in any transaction which would cause any member of the SMS Group to be in breach of any law or regulation on completion of the Acquisition, including of the economic sanctions administered by the United States Office of Foreign Assets Control or HM Treasury or any government entity or individual targeted by any of the economic sanctions of the United Nations, United States or the European Union or any of its member states;
No criminal property
(k) except as Disclosed, Bidco not having discovered that any asset of any member of the Wider SMS Group constitutes criminal property as defined by section 340(3) of the Proceeds of Crime Act 2002 (but disregarding paragraph (b) of that definition).
Part B: Further terms of the Acquisition
1. Subject to the requirements of the Panel in accordance with the Takeover Code, Bidco reserves the right in its sole discretion to waive:
(a) any of the deadlines set out in paragraph 2 of Part A of this Appendix I for the timing of the Court Meeting, the SMS General Meeting and/or the Sanction Hearing. If any such deadline is not met, Bidco shall make an announcement by 8.00 a.m. (London time) on the Business Day following such deadline confirming whether it has invoked or waived the relevant Condition or agreed with SMS to extend the deadline in relation to the relevant Condition; and
(b) in whole or in part, all or any of the Conditions listed in Part A above, except for Conditions 1, 2(a)(i), 2(b)(i) and 2(c)(i) (Conditions of the Scheme) which cannot be waived.
2. Conditions 3(a) to (k) (inclusive) must each be fulfilled or (if capable of waiver) be waived by Bidco by no later than 11.59 p.m. (London time) on the date immediately preceding the date of the Sanction Hearing, failing which the Acquisition will lapse. Bidco shall be under no obligation to waive (if capable of waiver) or treat as satisfied any of the Conditions that it is entitled (with the consent of the Panel) to invoke, by a date earlier than the latest date specified above for the fulfilment or waiver thereof, notwithstanding that the other Conditions may at such earlier date have been waived or fulfilled and that there are at such earlier date no circumstances indicating that any of such Conditions may not be capable of fulfilment.
3. If Bidco is required by the Panel to make an offer for SMS Shares under the provisions of Rule 9 of the Takeover Code, Bidco may make such alterations to any of the above Conditions and terms of the Acquisition as are necessary to comply with the provisions of that Rule.
4. Under Rule 13.5(a) of the Takeover Code, Bidco may only invoke a Condition to the Acquisition so as to cause the Acquisition not to proceed, to lapse or to be withdrawn with the consent of the Panel. The Panel will normally only give its consent if the circumstances which give rise to the right to invoke the Condition are of material significance to Bidco in the context of the Acquisition. This will be judged by reference to the facts of each case at the time that the relevant circumstances arise. The Conditions contained in paragraphs 1 and 2 of Part A above and, if applicable, any acceptance condition if the Offer is implemented by means of a Takeover Offer, are not subject to Rule 13.5(a) of the Takeover Code. Any Condition that is subject to Rule 13.5(a) of the Code may be waived by Bidco.
5. Bidco reserves the right to elect to implement the Acquisition by way of a Takeover Offer as an alternative to the Scheme (subject to the Panel's consent and the terms of the Co-operation Agreement). In such event, the Acquisition will be implemented on the same terms (subject to appropriate amendments including (without limitation) the inclusion of an acceptance condition set at a level permitted by the Panel and by the terms of the Co-operation Agreement (for so long as it remains in force) of the voting rights attaching to the SMS Shares) as those which would apply to the Scheme. Further, if sufficient acceptances of such offer are received and/or sufficient SMS Shares are otherwise acquired, and the Takeover Offer becomes or is declared unconditional in all respects, it is the intention of Bidco to apply the provisions of the Companies Act to acquire compulsorily any outstanding SMS Shares to which such Takeover Offer relates.
6. The Scheme will be governed by Scots law and be subject to the jurisdiction of the Court and to the Conditions set out above and the full terms to be set out in the Scheme Document. The Acquisition will be subject to the applicable requirements of the Takeover Code, the Panel, the London Stock Exchange, the Financial Conduct Authority, the AIM Rules and the Registrar of Companies.
7. Each of the Conditions shall be regarded as a separate Condition and shall not be limited by reference to any other Condition.
8. The Scheme Shares will be acquired by Bidco fully paid and free from all liens, equitable interests, charges, encumbrances, options, rights of pre-emption and any other third party rights and interests of any nature and together with all rights existing at the Effective Date or thereafter attaching or accruing to them, including (without limitation) the right to receive and retain in full all dividends and other distributions (if any) declared, made or paid, or any other return of value (whether by way of reduction of share capital, repurchase or redemption or otherwise) made, on or after the Effective Date in respect of the SMS Shares.
9. If, on or after the date of this Announcement and prior to the Effective Date, any dividend, distribution or other return of value is declared, paid or made or becomes payable by SMS in respect of the SMS Shares (including the Third and Fourth FY 2023 Dividend Instalments, but other than the Second FY 2023 Dividend Instalment expected to be paid on 25 January 2024), Bidco reserves the right (without prejudice to any right of Bidco, with the consent of the Panel, to invoke the Condition set out in paragraph 3(e)(ii) of Part A of this Appendix I) to reduce the consideration payable under the terms of the Acquisition for the SMS Shares to reflect the aggregate amount of such dividend, distribution or other return of value or excess. In such circumstances, SMS Shareholders would be entitled to retain any such dividend, distribution or other return of value declared, made or paid.
If and to the extent that any such dividend, distribution or other return of
value is paid or made in respect of the SMS Shares prior to the Effective
Date, and Bidco exercises its rights under this paragraph 9 to reduce the
consideration payable under the terms of the Acquisition for the SMS Shares,
any reference in this Announcement to the consideration payable under the
terms of the Acquisition shall be deemed to be a reference to the
consideration as so reduced.
If and to the extent that any such dividend, distribution or other return of
value has been declared or announced but not paid or made or is not payable in
respect of the SMS Shares prior to the Effective Date or by reference to a
record date prior to the Effective Date or is (i) transferred pursuant to the
Acquisition on a basis which entitles Bidco to receive the dividend,
distribution or other return of value and to retain it; or (ii) cancelled
before payment, the consideration payable under the terms of the Acquisition
for the SMS Shares shall not be subject to change in accordance with this
paragraph 9.
Any exercise by Bidco of its rights referred to in this paragraph 9 shall be
the subject of an announcement and, for the avoidance of doubt, shall not be
regarded as constituting any revision or variation of the Scheme or the
Acquisition.
10. Unless otherwise determined by Bidco or required by the Code and permitted by applicable law and regulations, the Acquisition is not being made, directly or indirectly, in, into or from, or by use of the mails of, or by any means of instrumentality (including, but not limited to, facsimile, e-mail or other electronic transmission, telex or telephone) of interstate or foreign commerce of, or of any facility of a national, state or other securities exchange of, any Restricted Jurisdiction and will not be capable of acceptance by any such use, means, instrumentality or facility or from within any Restricted Jurisdiction.
11. The Acquisition will be subject, inter alia, to the satisfaction (or waiver, if permitted) of the Conditions and certain further terms which are set out in this Appendix I and those terms which will be set out in the Scheme Document and such further terms as may be required to comply with the AIM Rules and the provisions of the Takeover Code.
12. The availability of the Acquisition to persons not resident in the United Kingdom may be affected by the laws of the relevant jurisdiction. Any persons who are subject to the laws of any jurisdiction other than the United Kingdom should inform themselves about and observe any applicable requirements. Further information in relation to Overseas Shareholders will be contained in the Scheme Document.
APPENDIX II
SOURCES OF INFORMATION AND BASES OF CALCULATION
1. As at the Latest Practicable Date, there were 133,606,918 SMS Shares in
issue.
2. As at the Latest Practicable Date, it is expected that a maximum of a
further 4,527,602 SMS Shares may be issued on or after the date of this
Announcement following the exercise of options under the SMS Share Plans. This
figure includes an estimate of the number of SMS Shares that will be subject
to ordinary course options to be granted under the SMS Share Plans following
the date of this Announcement.
3. Any references to the issued and to be issued share capital of SMS are
each based on:
(a) the 133,606,918 SMS Shares referred to in paragraph (1) above; and
(b) the 4,527,602 SMS Shares that it is estimated as at the Latest
Practicable Date may be issued pursuant to the SMS Share Plans referred to in
paragraph (2) above.
4. The value attributed to the existing issued and to be issued ordinary
share capital of the Company is based upon a fully diluted share capital
figure of 138,134,520 SMS Shares as calculated in paragraph (3) above.
5. The fully diluted equity value is based on the issued and to be issued
share capital of SMS as set out above.
6. The enterprise value of approximately £1.4 billion is based on the
reported net debt of £96 million as at 30 June 2023 as set out in the 2023
SMS Interim Results.
7. Unless stated otherwise, all prices quoted for SMS Shares are Closing
Prices.
8. Volume weighted average prices are derived from Bloomberg.
9. Certain figures included in this announcement have been subject to
rounding adjustments.
APPENDIX III
IRREVOCABLE UNDERTAKINGS
SMS Directors' Irrevocable Undertakings
The following SMS Directors have given irrevocable undertakings to vote in
favour of the Scheme at the Court Meeting and the Special Resolutions to be
proposed at the SMS General Meeting (or, if Bidco, with the consent of the
Panel, subsequently structures the Acquisition as a Takeover Offer, to accept
any Takeover Offer made by Bidco in accordance with the terms of the
irrevocable undertaking) in relation to the following SMS Shares:
Name of SMS Director Number of SMS Shares in respect of which undertaking is given Percentage of SMS issued ordinary share capital*
Tim Mortlock 72,228 0.0541%
Gail Blain 2,717 0.0020%
Miriam Greenwood 32,049 0.0240%
Graeme Bissett 22,911 0.0171%
Jamie Richards 8,611 0.0064%
Ruth Leak 2,825 0.0021%
* based on the number of SMS Shares in issue on the Latest Practicable Date.
These undertakings will cease to be binding only if:
· the Scheme or Offer has not become effective or been declared
unconditional in all respects in accordance with the requirements of the Code
(as the case may be) by 6.00pm on the Long Stop Date;
· the Scheme or Offer has become effective or unconditional (as
applicable) in accordance with its terms;
· Bidco announces, with the consent of the Panel, that it does not
intend to make or proceed with the Acquisition and no new, revised or
replacement Offer or Scheme is announced in accordance with Rule 2.7 of the
Code at the same time;
· the Offer or Scheme lapses or is withdrawn in accordance with its
terms and Bidco does not publicly confirm by such time that it intends to
proceed with the Acquisition or to implement the Acquisition by way of a
Takeover Offer or otherwise; or
· any competing offer for the entire issued and to be issued share
capital of the Company becomes or is declared wholly unconditional or, if
proceeding by way of a scheme of arrangement, becomes effective.
If Bidco exercises the right to switch to a Takeover Offer, these irrevocable
undertakings shall continue to be binding in accordance with their terms.
APPENDIX IV
DEFINITIONS
The following definitions apply throughout this document unless the context
otherwise requires:
"2022 SMS Annual Report" the annual report and audited accounts of the SMS Group for the year ended 31
December 2022;
"2023 SMS Interim Results" the interim results of the SMS Group for the half year ended 30 June 2023, as
announced by SMS on 12 September 2023;
"Acquisition" the proposed acquisition by Bidco of the entire issued, and to be issued,
ordinary share capital of SMS not already owned or controlled by the Bidco
Group, to be implemented by means of the Scheme, or should Bidco so elect in
accordance with the terms of the Co-operation Agreement with the consent of
the Panel, by means of a Takeover Offer, on the terms and subject to the
conditions set out in the Scheme Document (or the Offer Document as
applicable) and where the context admits, any subsequent revision, variation,
extension or renewal thereof;
"Acquisition Price" 955 pence per SMS Share;
"AIM" AIM, the market of that name operated by the London Stock Exchange;
"AIM Rules" the rules of AIM as set out in the "AIM Rules for Companies" issued by the
London Stock Exchange from time to time relating to AIM traded securities and
the operation of AIM;
"Announcement" this Announcement made pursuant to Rule 2.7 of the Takeover Code, including
its summary and Appendices;
"Appendices" the appendices to this Announcement and Appendix has a corresponding meaning;
"Articles" the articles of association of SMS from time to time;
"Bidco" Sienna Bidco Limited, a newly-incorporated private limited company
incorporated in England and Wales;
"Bidco Group" Bidco and its parent undertakings and its and such parent undertakings'
subsidiary undertakings and associated undertakings;
"Business Day" a day, not being a public holiday, Saturday or Sunday, on which clearing banks
in London and Edinburgh are open for normal business;
"Cavendish" Cavendish Securities plc;
"Clean Team Agreement" the clean team agreement between Kohlberg Kravis Roberts & Co. Partners
LLP and SMS dated 16 November 2023;
"Closing Price" the closing middle market price of a SMS Share as derived from the Daily
Official List on any particular date;
"Companies Act" the Companies Act 2006, as amended from time to time;
"Conditions" the conditions to the implementation of the Acquisition, as set out in
Appendix I to this Announcement and to be set out in the Scheme Document;
"Confidentiality Agreement" the confidentiality agreement between Kohlberg Kravis Roberts & Co.
Partners LLP and SMS dated 14 October 2023;
"Co-operation Agreement" the co-operation agreement between Bidco and SMS dated 7 December 2023;
"Court" the Court of Session at Parliament House, Parliament Square, Edinburgh, EH1
1RQ;
"Court Meeting" the meeting of Scheme Shareholders (or the relevant class or classes thereof)
to be convened at the direction of the Court pursuant to Part 26 of the
Companies Act at which a resolution will be proposed to approve the Scheme,
including any adjournment, postponement or reconvening thereof;
"Court Order" the order of the Court sanctioning the Scheme under Part 26 of the Companies
Act;
"CREST" the relevant system (as defined in the Regulations) in respect of which
Euroclear is the operator (as defined in the Regulations);
"Daily Official List" the daily official list of the London Stock Exchange;
"Dealing Disclosure" an announcement by a party to an offer or a person acting in concert as
required by Rule 8 of the Takeover Code;
"Disclosed" the information: (i) disclosed by or on behalf of SMS in the 2023 SMS Interim
Results or the 2022 SMS Annual Report; (ii) disclosed by or on behalf of SMS
in this Announcement; (iii) disclosed by or on behalf of SMS in any other
announcement to a Regulatory Information Service before the date of this
Announcement; or (iv) and matters fairly disclosed by or on behalf of SMS,
including via the Co-operation Agreement, the virtual data room operated by or
on behalf of SMS in respect of the Acquisition or via e-mail, before the date
of this Announcement to KKR or Bidco (including to their respective officers,
employees, agents or advisers in their capacity as such in respect of the
Acquisition);
"Effective" (i) if the Acquisition is implemented by way of the Scheme, the Scheme having
become effective pursuant to its terms, upon the delivery of the Court Order
to the Registrar of Companies; or (ii) if the Acquisition is implemented by
way of the Offer, the Offer having been declared or having become
unconditional in all respects in accordance with the requirements of the
Takeover Code;
"Effective Date" the date on which the Acquisition becomes Effective;
"Euroclear" Euroclear UK & Ireland Limited;
"FCA" or "Financial Conduct Authority" Financial Conduct Authority of the UK or its successor from time to time;
"FCA Handbook" the FCA's Handbook of rules and guidance as amended from time to time;
"FSMA" the Financial Services and Markets Act 2000, as amended from time to time;
"FY 2023" the financial year beginning on 1 January 2023 and ending on 31 December 2023;
"Interim Facilities Agreement" the interim facility agreement dated on or about the date hereof between,
amongst others, Bidco and the Interim Lenders;
"Interim Lenders" BNP Paribas S.A., HSBC Bank plc, National Westminster Bank Plc and Sumitomo
Mitsui Banking Corporation, London Branch;
"Investec" Investec Bank plc;
"KKR" Kohlberg Kravis Roberts & Co. L.P. and its affiliates;
"Latest Practicable Date" 6 December 2023, being the latest Business Day prior to date of this
Announcement;
"London Stock Exchange" the London Stock Exchange plc or its successor;
"Long Stop Date" 31 May 2024 or such later date as may be agreed in writing between Bidco and
SMS, with the approval of the Court and the Panel if required;
"Macquarie Capital" Macquarie Capital (Europe) Limited;
"Morgan Stanley" Morgan Stanley & Co. International plc;
"Meetings" the Court Meeting and the SMS General Meeting;
"Offer" or "Takeover Offer" subject to the consent of the Panel and the terms of the Cooperation
Agreement, should the Acquisition be implemented by way of a takeover offer as
defined in Chapter 3 of Part 28 of the Companies Act, the offer to be made by
or on behalf of Bidco to acquire the entire issued and to be issued share
capital of SMS, other than SMS Shares owned or controlled by the Bidco Group
and, where the context admits, any subsequent revision, variation, extension
or renewal of such offer;
"Offer Document" if the Acquisition is implemented by means of a Takeover Offer, the document
to be sent or made available to SMS Shareholders and persons with information
rights containing, amongst other things, the full terms and conditions of the
Acquisition;
"Offer Period" the Offer Period (as defined by the Takeover Code) relating to SMS which
commenced on 7 December 2023;
"Official List" the Official List of the FCA;
"Opening Position Disclosure" an announcement pursuant to Rule 8 of the Takeover Code containing details of
interests or short positions in, or rights to subscribe for, any relevant
securities of a party to the Acquisition;
"Overseas Shareholders" holders of Scheme Shares who are resident in, ordinarily resident in, or
citizens of, jurisdictions outside the United Kingdom;
"Panel" the UK Panel on Takeovers and Mergers;
"Pre-exceptional EBITDA" statutory EBITDA excluding exceptional items;
"RBC" RBC Europe Limited (trading as RBC Capital Markets);
"Registrar of Companies" the registrar of companies in Scotland;
"Regulations" the Uncertificated Securities Regulations 2001 (SI 2001/3755), including as it
forms part of the domestic law of the United Kingdom by virtue of the European
Union (Withdrawal) Act 2018;
"Regulatory Information Service" a regulatory information service as defined in the FCA Handbook;
"Relevant Authority" any central bank, ministry, governmental, quasigovernmental, supranational
(including the European Union), statutory, regulatory or investigative body,
authority or tribunal (including any national or supranational antitrust,
competition or merger control authority, any sectoral ministry or regulator
and any foreign investment review body), national, state, municipal or local
government (including any subdivision, court, tribunal, administrative agency
or commission or other authority thereof), any entity owned or controlled by
them, any private body exercising any regulatory, taxing, importing or other
authority, trade agency, association, institution or professional or
environmental body in any jurisdiction;
"relevant securities" as the context requires, SMS Shares, other SMS share capital and any
securities convertible into or exchangeable for, and rights to subscribe for,
any of the foregoing;
"Restricted Jurisdiction" any jurisdiction where local laws or regulations may result in a significant
risk of civil, regulatory or criminal exposure if information concerning the
Acquisition is sent or made available in that jurisdiction;
"Sanction Hearing" the Court hearing to sanction the Scheme and any adjournment, postponement or
reconvening thereof;
"Scheme" the proposed scheme of arrangement under Part 26 of the Companies Act to
effect the Acquisition between SMS and the holders of the Scheme Shares (the
full terms of which will be set out in the Scheme Document), with or subject
to any modification, addition or condition which SMS and Bidco may agree, and,
if required, the Court may approve or impose;
"Scheme Document" the document to be sent to (amongst others) SMS Shareholders and persons with
information rights containing, amongst other things, the terms and conditions
of the Scheme and notices of the Meetings and information regarding the proxy
forms in respect of the Meetings;
"Scheme Record Time" the time and date to be specified in the Scheme Document, expected to be 6.00
p.m. (London time) on the Business Day immediately preceding the Effective
Date (or such other date and/or time as Bidco and SMS may agree);
"Scheme Shareholders" registered holders of Scheme Shares from time to time;
"Scheme Shares" all SMS Shares: (i) in issue at the date of the Scheme Document and which
remain in issue at the Scheme Record Time; (ii) (if any) issued after the date
of the Scheme Document but before the Voting Record Time and which remain in
issue at the Scheme Record Time; and (iii) (if any) issued at or after the
Voting Record Time but at or before the Scheme Record Time on terms that the
holder thereof shall be bound by the Scheme or in respect of which the
original or any subsequent holders thereof are, or shall have agreed in
writing to be, bound by the Scheme which remain in issue at the Scheme Record
Time, excluding, in any case, any SMS Shares registered in the name of a
subsidiary owned by Bidco, any member of the Bidco Group, funds, vehicles
and/or accounts advised and/or managed by KKR or any nominee of any of the
foregoing, and any Treasury Shares, in each case immediately prior to the
Scheme Record Time;
"Second FY 2023 Dividend Instalment" the interim dividend announced by the Company on 12 September 2023 of 8.31875
pence per SMS Share, comprising the second instalment of the intended dividend
in respect of FY 2023, expected to be paid on 25 January 2024 to those SMS
Shareholders who are on the register of members of the Company on 5 January
2024;
"SMS" or "Company" Smart Metering Systems plc;
"SMS Board" or "SMS Directors" the directors of SMS at the time of this Announcement or, where the context so
requires, the directors of SMS from time to time;
"SMS General Meeting" the general meeting of SMS Shareholders to be convened to consider and if
thought fit pass, inter alia, the Special Resolutions in relation to the
Scheme, including any adjournments, postponements or reconvening thereof;
"SMS Group" SMS and its subsidiary undertakings and where the context permits, each of
them;
"SMS Share(s)" the existing unconditionally allotted or issued and fully paid ordinary shares
of £0.01 each in the capital of SMS and any further such ordinary shares
which are unconditionally allotted or issued before the Scheme becomes
Effective;
"SMS Share Plans" each of the SMS Unapproved Share Option Plan, adopted by SMS on 20 June 2011,
the SMS Long Term Incentive Plan, the rules of which were approved by the SMS
Shareholders on 19 May 2022, and the SMS Share Incentive Plan (as amended)
originally adopted by SMS on 20 June 2011;
"SMS Shareholder(s)" holders of SMS Shares from time to time;
"Special Resolutions" the special resolution(s) to be proposed at the SMS General Meeting necessary
to implement the Scheme, including (without limitation) a special resolution
to implement certain amendments to be made to the articles of association of
SMS;
"Takeover Code" the City Code on Takeovers and Mergers issued by the Panel on Takeovers and
Mergers, as amended from time to time;
"Third and Fourth FY 2023 Dividend Instalments" the interim dividends announced by the Company on 12 September 2023, each of
8.31875 pence per SMS Share, comprising the third and fourth instalments of
the intended dividend in respect of FY 2023, expected to be paid (in respect
of the third instalment) on 25 April 2024 to those SMS Shareholders who are on
the register of members of the Company on 5 April 2024 and (in respect of the
fourth instalment) on 25 July 2024 to those SMS Shareholders who are on the
register of members of the Company on 5 July 2024;
"Treasury Shares" any SMS Shares which are held by or which become held by SMS as treasury
shares (within the meaning of the Companies Act);
"UK" or "United Kingdom" United Kingdom of Great Britain and Northern Ireland;
"Underlying Profit Before Tax" profit before taxation excluding exceptional items and amortisation of certain
intangibles; amortisation of the SMS Group's enterprise resource planning
system, which went live in full in 2020, remains within the underlying cost
base of the business and is therefore a part of the SMS Group's underlying
profit measures;
"US" or "United States" United States of America, its territories and possessions, any state of the
United States of America, the District of Columbia, and all other areas
subject to its jurisdiction;
"Volume Weighted Average Price" the volume weighted average of the per share trading prices of SMS Shares on
AIM as reported through Bloomberg;
"Voting Record Time" the time and date to be specified in the Scheme Document by reference to which
entitlement to vote on the Scheme will be determined, expected to be 6.00 p.m.
on the day which is two Business Days before the date of the Court Meeting or,
if the Court Meeting is adjourned, 6.00 p.m. on the day which is two Business
Days before the date of such adjourned meeting;
"Wider Bidco Group" Bidco, funds, vehicles and/or accounts advised and/or managed by KKR and their
respective associated undertakings and any other body corporate partnership,
joint venture or person in which Bidco and all such undertakings (aggregating
their interests) have a direct or indirect interest of more than 30 per cent.
of the voting or equity capital or the equivalent; and
"Wider SMS Group" SMS and its subsidiaries, subsidiary undertakings, associated undertakings and
any other body corporate, partnership, joint venture or person in which SMS
and such undertakings (aggregating their interests) have a direct or indirect
interest of more than 30 per cent. of the voting or equity capital or the
equivalent (excluding, for the avoidance of doubt, Bidco, funds, vehicles
and/or accounts advised and/or managed by KKR and all of their respective
associated undertakings which are not members of the SMS Group).
For the purposes of this Announcement, "subsidiary", "subsidiary undertaking",
"undertaking" and "associated undertaking" have the respective meanings given
thereto by the Companies Act.
All references to "pounds", "pounds Sterling", "Sterling", "GBP", "£",
"pence" and "p" are to the lawful currency of the United Kingdom.
All references to "US dollars", "USD", "US$", "$" and "cents" are to the
lawful currency of the United States.
All references to statutory provision or law or to any order or regulation
shall be construed as a reference to that provision, law, order or regulation
as extended, modified, replaced or reenacted from time to time and all
statutory instruments, regulations and orders from time to time made
thereunder or deriving validity therefrom.
All times referred to are London time unless otherwise stated.
References to the singular include the plural and vice versa.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END ACQGLBDDCSGDGXR