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

<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.

Materials, IPO & Equity Analyst

Venkat Ramana Nandyal

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Equity Capital Markets

Calisen is a meter asset provider. The company has orders to install nearly 6M electric and gas meters by end of 2024.Calisen is expected to raise £300M at IPO at a price range of 225p to 265p valuing the company between £1.25 to £1.42B. GER values the company at £1.51B based on discounted cash flow or 7% above the high end of the price range.In our previous note <a href="https://www.smartkarma.com/insights/calisen-ipo-low-risk-business-model-at-attractive-price" target="_blank" data-smartkarma-citation="insights:36211" rel="noopener">(Calisen IPO: Low-Risk Business Model at Attractive Price</a>), we stated that Calisen offers near term growth potential and in longer-term a stable revenue profile with high EBITDA margins.  Our valuation analysis suggests that the IPO price range is attractive in the context of the company’s business model.

Calisen is a meter asset provider. The company has orders to install nearly 6M electric and gas meters by end of 2024.Calisen is expected to raise £300M at IPO at a price range of 225p to 265p valuing the company between £1.25 to £1.42B. GER values the company at £1.51B based on discounted cash flow or 7% above the high end of the price range.In our previous note (Calisen IPO: Low-Risk Business Model at Attractive Price), we stated that Calisen offers near term growth potential and in longer-term a stable revenue profile with high EBITDA margins.  Our valuation analysis suggests that the IPO price range is attractive in the context of the company’s business model.

Calisen IPO: Offer Price Indicates Discount to Base Case Valuation

Calisen is a Manchester-based smart infrastructure and meter asset provider (MAP). The company is privately owned by KKR and expects to list in early February. The company expects to raise £300M and KKR is also expected to sell a portion of its holding in IPO. The company intends to float 25% shares at a price range of 225p and 265p implying a maximum valuation of £1.4B.Based on GER initial valuation, Calisen’s IPO is priced at a 5% - 20% discount to peer valuation.

 Calisen is a Manchester-based smart infrastructure and meter asset provider (MAP). The company is privately owned by KKR and expects to list in early February. The company expects to raise £300M and KKR is also expected to sell a portion of its holding in IPO. The company intends to float 25% shares at a price range of 225p and 265p implying a maximum valuation of £1.4B.Based on GER initial valuation, Calisen’s IPO is priced at a 5% - 20% discount to peer valuation.

Calisen IPO: Low-Risk Business Model at Attractive Price

United Kingdom

Calisen PLC operates as an asset management company. The Company owns and manages energy infrastructure assets. Calisen serves customers in the United Kingdom.

Calisen PLC (1779730D LN)

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Calisen is a Manchester-based smart infrastructure and meter asset provider (MAP). The company is privately owned by KKR and expects to list in...

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

Jesus Rodriguez Aguilar

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

Calisen IPO: Offer Price Indicates Discount to Base Case Valuation

Calisen is a meter asset provider. The company has orders to install nearly 6M electric and gas meters by end of 2024.Calisen is expected to raise...

Venkat Ramana Nandyal

Calisen IPO: Low-Risk Business Model at Attractive Price

Calisen is a Manchester-based smart infrastructure and meter asset provider (MAP). The company is privately owned by KKR and expects to list in...

Venkat Ramana Nandyal

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