SMS.L Regulatory News (SMS)

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF SUCH JURISDICTION. PLEASE SEE THE IMPORTANT NOTICES AT THE END OF THIS ANNOUNCEMENT. ANY FAILURE TO COMPLY WITH THIS RESTRICTION MAY CONSTITUTE A VIOLATION OF U.S. SECURITIES LAW

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION

FOR IMMEDIATE RELEASE

18 January 2024

RECOMMENDED FINAL CASH OFFER

for

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

SWITCH FROM SCHEME OF ARRANGEMENT TO TAKEOVER OFFER AND RECOMMENDED FINAL CASH OFFER

ADJOURNMENT OF COURT AND GENERAL MEETINGS

SMS TRADING UPDATE

On 7 December 2023, the boards of directors of SMS and Sienna Bidco Limited ("Bidco"), a newly formed company wholly-owned by funds advised by Kohlberg Kravis Roberts & Co. L.P. and its affiliates, announced that they had reached agreement on the terms and conditions of a recommended cash acquisition by Bidco of the entire issued and to be issued ordinary share capital of SMS (the "Acquisition"), to be effected by means of a Court-sanctioned scheme of arrangement (the "Scheme") under Part 26 of the Companies Act 2006 (the "Companies Act").

The scheme document in relation to the Scheme (the "Scheme Document") was posted to SMS Shareholders on 15 December 2023. Capitalised terms used in this announcement shall, unless otherwise defined, have the same meanings as set out in the Scheme Document.

Switch to Takeover Offer

SMS, KKR and Bidco are of the view that the terms of the Acquisition are in the best interests of SMS shareholders as a whole and therefore, in order to increase the certainty of its execution, Bidco has determined, with the consent of SMS and the Takeover Panel, to implement the Acquisition by way of a recommended takeover offer (as defined in section 974 of the Companies Act) (a "Takeover Offer") rather than by way of the Scheme.

The SMS Directors believe that Bidco's decision to switch to a Takeover Offer (with the consent of SMS) will allow SMS Shareholders to benefit from the Acquisition (subject to the Acceptance Condition (as defined below) and all other conditions being satisfied or (if capable of waiver) waived).

Court Meeting and General Meeting

As the Acquisition is to be implemented by way of a Takeover Offer, the only business that will be dealt with at the Court Meeting and the General Meeting which are convened for 22 January 2024 will be in connection with the discontinuation of the Scheme. Accordingly the SMS Board recommends that SMS Shareholders do not attend the Court Meeting and the General Meeting on 22 January 2024.

Conditions

Save where set out in this announcement, the terms and conditions of the Acquisition remain unchanged from those set out in the Scheme Document (subject to appropriate amendments to reflect the change in structure by which the Acquisition is to be implemented, being by Takeover Offer rather than the Scheme). The amended conditions will be set out in full in the Offer Document.

The Acquisition is conditional on, among other things, valid acceptances being received (and not validly withdrawn) by not later than 1:00 p.m. (London time) on the unconditional date of the Takeover Offer (or such later time(s) and/or date(s) as Bidco may, subject to the rules of the Takeover Code and with the consent of the Panel, decide) in respect of such number of SMS Shares which, together with the SMS Shares acquired or unconditionally agreed to be acquired during the Offer Period (whether pursuant to the Takeover Offer or otherwise), will result in Bidco or another member of the Bidco Group holding SMS Shares carrying in aggregate more than 50 per cent. of the voting rights normally exercisable at general meetings of SMS including (to the extent, if any, required by the Panel for this purpose) any such voting rights attaching to any SMS Shares that are unconditionally allotted but not issued before the Takeover Offer becomes unconditional as to acceptances (the "Acceptance Condition"). Unless the Panel agrees otherwise, the Acceptance Condition shall only be capable of being satisfied when all other Conditions have been satisfied or waived.

Final Cash Offer

Under the terms of the recommended Takeover Offer, Bidco continues to offer SMS Shareholders 955 pence in cash for each SMS Share (the "Final Offer"), representing an attractive premium of approximately:

· 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 commencement of the Offer Period);

· 50.7 per cent. to the three-month Volume Weighted Average Price of 634 pence per SMS Share on 6 December 2023 (being the last Business Day prior to the commencement of the Offer Period); and

· 43.8 per cent. to the six-month Volume Weighted Average Price of 664 pence per SMS Share on 6 December 2023 (being the last Business Day prior to the commencement of the Offer Period).

The Final Offer of 955 pence in cash per SMS Share is final and will not be increased, except that Bidco reserves the right to increase the offer price and/or otherwise improve the terms of the Acquisition (i) if there is an announcement on or after the date of this announcement of a possible offer or a firm intention to make an offer for SMS by any third party, or (ii) if the Takeover Panel otherwise provides its consent.

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 appeared on the register of members of the Company on 5 January 2024.

For the avoidance of doubt, and subject to the Takeover Offer not having lapsed or been withdrawn in accordance with its terms and Bidco having not publicly confirmed by such time that it does not intend to proceed with the Acquisition, SMS confirms that it does not intend to pay the Third and Fourth FY 2023 Dividend Instalments which were expected to be paid on 25 April 2024 and 25 July 2024 respectively.

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, Bidco will reduce the Acquisition Price by the amount of such dividend or other distribution. If Bidco made such a reduction in respect of a dividend or other distribution, SMS Shareholders would be entitled to retain that dividend or other distribution.

No third-party proposal or indication of interest

The SMS Board confirms that, from the date of KKR's initial approach in respect of the Acquisition to the date of this announcement, it has not received any formal proposals or indications of interest in respect of an offer to acquire the entire issued, and to be issued, ordinary share capital of SMS from any third parties.

Timetable

It is a requirement of the Takeover Code that an offer document containing, amongst other things, the Conditions of the Acquisition (an "Offer Document") is published. The Offer Document will specify the actions to be taken by SMS Shareholders in respect of the Takeover Offer and it is anticipated that Bidco will publish and post the Offer Document (together with a form of acceptance) (where applicable) to SMS Shareholders (other than SMS Shareholders located in any Restricted Jurisdictions, in each case, where to do so would violate the laws of that jurisdiction) as soon as reasonably practicable after the date of this announcement (currently anticipated to be on or around 24 January 2024). The Offer Document will also be made available by SMS on its website at https://www.sms-plc.com/documents/. The Panel has agreed with Bidco and SMS that "Day 60" of the Takeover Code timetable will be the day falling 60 days after publication of the Offer Document (or such other later date as may be determined by Bidco with the agreement of the Panel to be the last date for fulfilment of the Acceptance Condition).

Further details of the expected timetable will be set out in the Offer Document.

Recommendation

The SMS Directors, who have been so advised by RBC and Investec as to the financial terms of the Acquisition, continue to consider the terms of the Acquisition to be fair and reasonable. In providing their advice to the SMS Directors, RBC and Investec 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.

The SMS Directors continue to consider that the terms of the Acquisition are in the best interests of SMS Shareholders as a whole. Accordingly, the SMS Directors intend to unanimously recommend that the SMS Shareholders accept, or procure the acceptance of, the Takeover Offer 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 over which they have control, being in aggregate 141,341 SMS Shares (representing approximately 0.1 per cent. of the existing issued ordinary share capital of SMS) as at 17 January 2024 (being the last Business Day before the date of this announcement).

All of the irrevocable undertakings of the SMS Directors as described in the Scheme Document continue to remain valid in relation to the Takeover Offer. These commitments comprise irrevocable undertakings in respect of 141,341 SMS Shares, in aggregate, representing approximately 0.1 per cent. of SMS's issued ordinary share capital as at 17 January 2024 (being the last Business Day before the date of this announcement).

Cancellation of admission to trading on AIM, compulsory acquisition and re-registration

Assuming the Takeover Offer becomes or is declared unconditional and that Bidco has, by virtue of acceptances of the Takeover Offer or otherwise, acquired, or agreed to acquire, SMS Shares carrying not less than 75 per cent. of the voting rights then exercisable at a general meeting of SMS Shareholders, it is intended that the admission to trading of the SMS Shares on AIM will be cancelled.

If Bidco receives acceptances of the Takeover Offer in respect of, and/or otherwise acquires or unconditionally contracts to acquire, 90 per cent. or more of the SMS Shares by nominal value and voting rights attaching to such shares to which the Takeover Offer relates and the Takeover Offer has become or been declared unconditional, Bidco intends to exercise its rights pursuant to the provisions of Chapter 3 of Part 28 of the Companies Act to acquire compulsorily the remaining SMS Shares in respect of which the Takeover Offer has not been accepted on the same terms as the Takeover Offer.

It is also intended that, following the Takeover Offer becoming or being declared unconditional and Bidco, by virtue of acceptances of the Takeover Offer or otherwise, having acquired, or having agreed to acquire, SMS Shares carrying not less than 75 per cent. of the voting rights then exercisable at a general meeting of SMS Shareholders, SMS will be re-registered as a private limited company.

Such cancellation of admission to trading on AIM of SMS Shares and re-registration of SMS as a private limited company would significantly reduce the liquidity and marketability of any SMS Shares in respect of which the Takeover Offer has not been accepted at that time and their value may be affected as a consequence.

Any remaining SMS Shareholders (unless their SMS Shares are acquired by Bidco pursuant to the provisions of Chapter 3 of Part 28 of the Companies Act) would become minority shareholders in a majority controlled private limited company and may therefore be unable to sell their SMS Shares. There can be no certainty that SMS would pay any further dividends or other distributions or that such minority SMS Shareholders would again be offered an opportunity to sell their SMS Shares on terms which are equivalent to or no less advantageous than those under the Takeover Offer.

Other consequences of the Takeover Offer

If Bidco receives acceptances of the Takeover Offer in respect of, and/or otherwise acquires or unconditionally contracts to acquire, more than 50 per cent. of the SMS Shares by nominal value and voting rights attaching to such shares to which the Takeover Offer relates and the Takeover Offer has become or been declared unconditional, then Bidco will have significant control over SMS. Bidco will be in a position to determine, for example, the composition of the SMS Board and management team, the overall strategy of the SMS Group, and the declaration or cessation of any dividends. Bidco could also increase its aggregate shareholding in SMS without restriction and may in due course acquire 75 per cent. or more of the voting rights of SMS. In the meantime, SMS Shares in respect of which the Takeover Offer has not been accepted at that time are likely to be affected by reduced trading volume and reduced liquidity as a consequence.

SMS Trading Update

Smart Metering Systems plc (AIM: "SMS", the "Group"), the integrated energy infrastructure company owning and managing smart meters, energy data, grid-scale battery storage and other carbon reduction (CaRe) assets, provides a trading update for the year ended 31 December 2023 ("FY 2023").

Index-linked annualised recurring revenue

The total meter and data assets ILARR was £113.4m at 31 December 2023, which includes the annual RPI adjustment. This represents a 16.8% increase since the prior year end (31 December 2022: £97.1m).

Smart meters

During the year, the Group installed c.450,000 smart meters (FY 2022: c.480,000), increasing the total smart meter portfolio to c.2.5m (31 December 2022: c.2.1m).

Further to the announcement made on 1 December 2023 by Octopus Energy Group ("Octopus") on the completion of its acquisition of Shell Energy Retail Limited ("SERL") and the migration of SERL's energy customers to Octopus's systems, SMS has received a preliminary indication at an operational level from SERL that it proposes to migrate certain gas and electric meter installations under its contract with SMS to Octopus. SMS is considering this information and will continue to engage with SERL and Octopus in the coming months.

We continue to see wider opportunities to support energy suppliers to deliver on their smart meter obligations (for example in more complex installations).

Grid-scale battery storage

The Group's portfolio of grid-scale battery storage assets stood at 860MW, of which 240MW (1MW/hour) was operational by 31 December 2023, an increase of 100MW since 31 December 2022. The operational portfolio generated an annualised equivalent EBITDA of c.£46,000/MW (FY 2022: c.£123,000/MW), broadly in line with the wider market. Notwithstanding the recent volatility in battery revenues, we continue to expect the long-term EBITDA contribution to be c.£57,000 - £65,000/MW. 

A 50MW (1MW/hour) site, which was expected to be operational in Q4 2023, has been delayed to Q2 2024 due to upstream protection works impacting the energisation of the site. In addition, the Group expects three 2MW/hour sites(1), totalling 90MW, to become operational in Q4 2024.

Developing CaRe(2) assets

The Group continued to make strong progress in building its delivery capability, commercial models and pipelines for the provision of other developing CaRe assets and data services.

FY 2023 and outlook

The FY 2023 pre-exceptional EBITDA and underlying PBT are expected to be in line with the Board's expectations. Net debt as at 31 December 2023 was £171.9m.

The Group remains confident in FY 2024 and its medium-term outlook.

SMS will confirm the expected timing for release of its FY 2023 results in due course.

(1) The capex and long-term EBITDA from a 2MW/hour site is expected to be 50-60% more than a 1MW/hour site.

(2) Includes behind-the-meter solutions, such as solar and storage, domestic EV chargers and air-sourced heat pumps, and public EV charging infrastructure.

Enquiries:

Simpson Thacher & Bartlett LLP is acting as legal adviser to KKR and Bidco.

Hogan Lovells International LLP is acting as legal adviser to SMS. Burness Paull LLP are providing legal advice to SMS as to Scots 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 Takeover 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 Takeover 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 Offer Document which, together with the form of acceptance, shall contain the full terms and Conditions of the Acquisition, including details of how to accept the Takeover Offer. SMS Shareholders are strongly advised to read the formal documentation in relation to the Takeover Offer once it has been dispatched. 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.

Each of Cavendish (as nominated adviser and joint broker to SMS), Investec (as joint financial adviser to and joint broker to SMS and Rule 3 Adviser to SMS) and RBC (as joint financial adviser and joint broker to SMS) have 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.

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.

The availability of the Takeover Offer to SMS Shareholders who are not resident in and citizens of the UK may be affected by the laws of the relevant jurisdictions in which they are located or of which they are citizens and therefore persons who are not resident in the UK should inform themselves of, and observe, any applicable legal or regulatory requirements of their jurisdictions. 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 Offer disclaim any responsibility or liability for the violation of such restrictions by any person.

Unless otherwise determined by Bidco or required by the Takeover Code, and permitted by applicable law and regulation, the Takeover Offer may not be made directly or indirectly, in or into, or by the use of mails or any means or 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 the Offer may not be capable of acceptance by any such use, means, instrumentality or facilities. Copies of this announcement and any formal documentation relating to the Takeover Offer are not being, and must not be, directly or indirectly, mailed or otherwise forwarded, distributed or sent in or into or from any Restricted Jurisdiction and persons receiving such documents (including, without limitation, agents, custodians, nominees and trustees) must not mail or otherwise forward, distribute or send them in or into or from any Restricted Jurisdiction. Doing so may render invalid any related purported acceptance of the Takeover Offer.

This announcement does not constitute an offer or invitation to purchase or subscribe for any securities or a solicitation of an offer to buy any securities pursuant to this announcement or otherwise in any jurisdiction in which such offer or solicitation is unlawful.

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 Offer Document.

Additional Information for US Investors

The Takeover Offer relates to the shares of a Scottish company and is being made by means of a contractual takeover offer under the Takeover Code and under English and Scots law. The Offer is being made in the United States pursuant to all applicable laws and regulations, including, to the extent applicable, to holders of SMS Shares resident in the United States ("US SMS Shareholders") pursuant to Section 14(e) and Regulation 14E under the US Exchange Act as a "Tier II" tender offer, and otherwise in accordance with the requirements of the Takeover Code. Accordingly, the Takeover Offer is subject to the disclosure and other procedural requirements, including with respect to withdrawal rights, offer timetable, settlement procedures and timing of payments that are different from those applicable under US domestic tender offer procedures and law. The Takeover Offer is being made in the United States by Bidco and no one else. The Takeover Offer will be made to US SMS Shareholders on the same terms and conditions as those made to all other SMS Shareholders to whom an offer is made. Any information documents, including the Offer Document, will be disseminated to US SMS Shareholders on a basis comparable to the method that such documents are provided to the other SMS Shareholders to whom an offer is made.

Certain financial information included in this announcement and the Offer Document has been or will have been prepared in accordance with generally accepted 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.

The receipt of cash pursuant to the Takeover Offer by a US SMS Shareholder as consideration for the transfer of its SMS Shares pursuant to the Takeover Offer 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 Takeover Offer 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 in connection with the Takeover Offer, 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.

To the extent permitted by the Takeover Code and applicable law, 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, outside the Takeover Offer, during the Offer Period and the period in which the Takeover Offer remains open for acceptance. Also, to the extent permitted by the Takeover Code and applicable law, in accordance with normal UK practice and pursuant to Rule 14e-5(b) of the US Exchange Act, each of Morgan Stanley, Macquarie Capital, Cavendish, 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 be made outside the U.S. and would comply with applicable law. Any such purchases by Bidco or its affiliates will not be made at prices higher than the price of the Takeover Offer provided in this announcement unless the price of the Takeover Offer is increased accordingly. Any information about such purchases will be disclosed as required in the UK, will be reported to a Regulatory Information Service and will be available on the London Stock Exchange website, www.londonstockexchange.com/.

Neither the U.S. Securities and Exchange Commission (the "SEC") nor any securities supervisory authority of any state or other jurisdiction in the United States has approved or disapproved the Takeover Offer or reviewed it for its fairness, nor have the contents of the Offer Document or any other documentation relating to the Takeover Offer been reviewed for accuracy, completeness or fairness by the SEC or any securities supervisory authority in the United States. Any representation to the contrary is a criminal offence in the United States.

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.