European Event-Driven Analyst

Jesus Rodriguez Aguilar

Event-Driven

<ul>
<li>KKR takes advantage of a the depressed share price of <a href="https://www.smartkarma.com/entities/smart-metering-systems-plc" target="_blank" data-smartkarma-citation="entities:23459:1" rel="noopener">Smart Metering Systems (SMS LN)</a>  that operates a stable, cash generating and misunderstood defensive business with revenues linked to inflation.</li>
<li>KKR offers 955p (+8.31875p/share declared divi), a 40% premium 40%, 15x EV/24e EBITDA. 0.1% irrevocable undertakings is negligible (top ten shareholders own c.54%). A counteroffer and/or sweetening is possible.</li>
<li>Spread is 0.45%/1.52% (gross/annualised, assuming settlement by 29 March, including declared dividend). Turnover has been high since announcement. Risk/return seems attractive. Recommendation is long SMS LN.</li>
</ul>


KKR takes advantage of a the depressed share price of Smart Metering Systems (SMS LN)  that operates a stable, cash generating and misunderstood defensive business with revenues linked to inflation.
KKR offers 955p (+8.31875p/share declared divi), a 40% premium 40%, 15x EV/24e EBITDA. 0.1% irrevocable undertakings is negligible (top ten shareholders own c.54%). A counteroffer and/or sweetening is possible.
Spread is 0.45%/1.52% (gross/annualised, assuming settlement by 29 March, including declared dividend). Turnover has been high since announcement. Risk/return seems attractive. Recommendation is long SMS LN.


KKR/Smart Metering Systems: Agreed Cheap Offer

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

<ul>
<li>M3 extends its Tender Offer for <a href="https://www.smartkarma.com/entities/benefit-one-inc" target="_blank" data-smartkarma-citation="entities:14502:1" rel="noopener">Benefit One (2412 JP)</a>. M3 can match Dai-Ichi Life proposal, financially, if backed. And <a href="https://www.smartkarma.com/entities/dai-ichi-life-insurance" target="_blank" data-smartkarma-citation="entities:1109:1" rel="noopener">Dai Ichi Life Insurance (8750 JP)</a> can probably bump further. </li>
<li>
<a href="https://www.smartkarma.com/entities/haier-electronics-group-co" target="_blank" data-smartkarma-citation="entities:4877:1" rel="noopener">Haier Electronics Group Co (1169 HK)</a>'s CEO and <a href="https://www.smartkarma.com/entities/org-technology-co-ltd-a" target="_blank" data-smartkarma-citation="entities:17510:1" rel="noopener">ORG Technology Co., Ltd. A (002701 CH)</a> reckon they can trump SASAC's Offer for <a href="https://www.smartkarma.com/entities/cpmc-holdings-ltd" target="_blank" data-smartkarma-citation="entities:10427:1" rel="noopener">CPMC Holdings (906 HK)</a>.</li>
<li>First City of London Investment Management, then Palliser Capital and now Whitebox, urge <a href="https://www.smartkarma.com/entities/samsung-c-t-corporation" target="_blank" data-smartkarma-citation="entities:481:1" rel="noopener">Samsung C&amp;T (028260 KS)</a> to improve its cash spending, improve governance and communications and simplify its corporate structure</li>
</ul>


M3 extends its Tender Offer for Benefit One (2412 JP). M3 can match Dai-Ichi Life proposal, financially, if backed. And Dai Ichi Life Insurance (8750 JP) can probably bump further. 

Haier Electronics Group Co (1169 HK)'s CEO and ORG Technology Co., Ltd. A (002701 CH) reckon they can trump SASAC's Offer for CPMC Holdings (906 HK).
First City of London Investment Management, then Palliser Capital and now Whitebox, urge Samsung C&amp;T (028260 KS) to improve its cash spending, improve governance and communications and simplify its corporate structure


Last Week in Event SPACE: Benefit One, CPMC, Samsung C&T, Sands China, Shinko Electric, Hankook & Co

<a href="https://www.smartkarma.com/entities/calisen-plc" target="_blank" data-smartkarma-citation="entities:28828:1" rel="noopener">Calisen PLC (1779730D LN)</a> goes private after its 7 February listing in London.
<ul>
<li>A consortium of funds has agreed to acquire Calisen from KKR Evergreen Aggregator L.P., funds managed by BlackRock, Inc., Goldman Sachs, certain Directors of Calisen and others for £1.4 bn on 11 December 2020.</li>
<li>
261p per share in cash, for a total consideration to shareholders of £1,430.23 mn and an implied EV of £1,988.09mn.
</li>
<li>The offered consideration represents 7.6x EV/Fwd Revenue, 9.8x EV/Fwd EBITDA and 30.1x P/Fwd EPS.</li>
<li>
Irrevocable undertakings. Calisen Directors holding c. 0.9% stake (and its nine members will receive upon closing about £12.5 mn) and KKR Evergreen holding c. 72.8%, all together holding approximately a 73.6% stake in Calisen.</li>
</ul>
Calisen is highly levered, which goes hand-in-hand with its predictable CF.
<ul>
<li>Calisen’s business produces high-quality, “annuity-like” cash flow which provides downside protection in case of a significant market decline.</li>
</ul>
Upon announcement, the shares shot up by 24.7% and closed at 258p on 11 December.
The offer represents 9.8x EV/Fwd EBITDA vs. 14.1x for <a href="https://www.smartkarma.com/entities/smart-metering-systems-plc" target="_blank" data-smartkarma-citation="entities:23459:1" rel="noopener">Smart Metering Systems (SMS LN)</a> , which is not loss-making. By putting Calisen on the same multiple, the implied equity value would be 420p. On this basis, the offer does not look generous, but the chances of a sweetened bid are slim. KKR is making a decent ROI after four years and is happy to sell.
This is a rock-solid trade as the acceptances required for the deal to go ahead (over 75% minimum acceptance condition) are just 1.3% of the common shares.
Gross spread is 1.14%, which, while not overly exciting, shows the very high probabilities that the transaction will close. Recommendation is LONG Calisen, TP 261p.

Calisen PLC (1779730D LN) goes private after its 7 February listing in London.

A consortium of funds has agreed to acquire Calisen from KKR Evergreen Aggregator L.P., funds managed by BlackRock, Inc., Goldman Sachs, certain Directors of Calisen and others for £1.4 bn on 11 December 2020.

261p per share in cash, for a total consideration to shareholders of £1,430.23 mn and an implied EV of £1,988.09mn.

The offered consideration represents 7.6x EV/Fwd Revenue, 9.8x EV/Fwd EBITDA and 30.1x P/Fwd EPS.

Irrevocable undertakings. Calisen Directors holding c. 0.9% stake (and its nine members will receive upon closing about £12.5 mn) and KKR Evergreen holding c. 72.8%, all together holding approximately a 73.6% stake in Calisen.

Calisen is highly levered, which goes hand-in-hand with its predictable CF.

Calisen’s business produces high-quality, “annuity-like” cash flow which provides downside protection in case of a significant market decline.

Upon announcement, the shares shot up by 24.7% and closed at 258p on 11 December.
The offer represents 9.8x EV/Fwd EBITDA vs. 14.1x for Smart Metering Systems (SMS LN) , which is not loss-making. By putting Calisen on the same multiple, the implied equity value would be 420p. On this basis, the offer does not look generous, but the chances of a sweetened bid are slim. KKR is making a decent ROI after four years and is happy to sell.
This is a rock-solid trade as the acceptances required for the deal to go ahead (over 75% minimum acceptance condition) are just 1.3% of the common shares.
Gross spread is 1.14%, which, while not overly exciting, shows the very high probabilities that the transaction will close. Recommendation is LONG Calisen, TP 261p.

United Kingdom

Smart Metering Systems plc, through its subsidiaries, connects, owns, operates, and maintains metering systems and databases on behalf of energy companies in the United Kingdom, Italy, and the Caribbean. It operates through three segments: Asset Management, Asset Installation, and Energy Management. The Asset Management segment engages in the regulated management of gas meters, electric meters, and ADM devices. The Asset Installation segment installs domestic, industrial, and commercial gas meters and electricity meters. The Energy Management segment provides energy advisory services. The company also provides data management and energy management, electricity and gas utility management services, and electricity and gas meter rental services. The company was formerly known as UK Smart Metering Group Limited and changed its name to Smart Metering Systems plc in June 2011. Smart Metering Systems plc was founded in 1995 and is based in Glasgow, the United Kingdom.

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Smart Metering Systems (SMS LN)

KKR/Smart Metering Systems: Agreed Cheap Offer

KKR takes advantage of depressed share price of Smart Metering Systems, offering a 40% premium. Counteroffer and/or sweetening is possible....

Jesus Rodriguez Aguilar

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The weekend is here! Pour yourself a coffee, grab a comfortable seat, and sift through a brief summary of insights on various events discussed...

David Blennerhassett

Recommended Private Equity Cash Offer

At 9.8x EV/Fwd EBITDA the offer is not very generous, but a sweetened bid is unlikely. Gross spread of 1.4% is not overly exciting, but the...

Jesus Rodriguez Aguilar

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52-week Range

Market Cap (USDm)

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Dividend (Yield)

KKR/Smart Metering Systems: Agreed Cheap Offer

​KKR takes advantage of depressed share price of Smart Metering Systems, offering a 40% premium. Counteroffer and/or sweetening is possible....

Jesus Rodriguez Aguilar

Last Week in Event SPACE: Benefit One, CPMC, Samsung C&T, Sands China, Shinko Electric, Hankook & Co

The weekend is here! Pour yourself a coffee, grab a comfortable seat, and sift through a brief summary of insights on various events discussed...

David Blennerhassett

Recommended Private Equity Cash Offer

At 9.8x EV/Fwd EBITDA the offer is not very generous, but a sweetened bid is unlikely. Gross spread of 1.4% is not overly exciting, but the...

Jesus Rodriguez Aguilar

KKR takes advantage of depressed share price of Smart Metering Systems, offering a 40% premium. Counteroffer and/or sweetening is possible....