CIP.L Regulatory News (CIP)

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO, THE UNITED STATES OF AMERICA, AUSTRALIA, CANADA, JAPAN, NEW ZEALAND OR SOUTH AFRICA OR ANY OTHER JURISDICTION WHERE IT IS UNLAWFUL TO DISTRIBUTE THIS ANNOUNCEMENT.

THIS ANNOUNCEMENT IS NOT AN OFFER OF SECURITIES FOR SALE IN THE UNITED STATES OR ANY OTHER JURISDICTION. INVESTORS SHOULD NOT SUBSCRIBE FOR OR PURCHASE ANY SECURITIES REFERRED TO IN THIS ANNOUNCEMENT EXCEPT ON THE BASIS OF INFORMATION IN THE ADMISSION DOCUMENT PUBLISHED BY CIP MERCHANT CAPITAL LIMITED IN CONNECTION WITH THE PROPOSED ADMISSION OF ITS ORDINARY SHARES TO TRADING ON AIM.

22 December 2017

CIP MERCHANT CAPITAL LIMITED

("CIP Merchant Capital" or the "Company")

SUBSCRIPTION OF 55,000,000 NEW ORDINARY SHARES

TO RAISE GROSS PROCEEDS OF £55.0 MILLION

AND

ADMISSION TO TRADING ON AIM

CIP Merchant Capital is a closed-ended investment company incorporated in Guernsey on 13 September 2017. The Company was incorporated as a vehicle through which to exploit the expertise of Merchant Capital Manager Limited (the "Investment Manager"), an affiliate of Continental Investment Partners SA ("CIP"), to generate returns for its shareholders through investment in listed equity and other financial products and instruments using a private equity approach. CIP will provide certain investment due diligence, monitoring and reporting services to the Investment Manager.

The Company has agreed to issue, conditional upon Admission, 55.0 million ordinary shares of no par value (the "Subscription Shares") at the subscription price of 100 pence per share ("Subscription Price") (the "Subscription"). It is anticipated that the gross proceeds of the Subscription will be £55.0 million. The Subscription is conditional, inter alia, on Admission becoming effective by no later than 8.00 a.m. today or such later date (being no later than 31 December 2017) as the Company and Strand Hanson may agree.

CIP was established in July 2013, as a result of a common need of clients of Marco Fumagalli and Carlo Sgarbi to generate returns through investment in financial products that are flexible and specialised. CIP is principally focused on three investment areas: (i) liquid strategies in regulated financial markets focused on corporate and financial bonds; (ii) private/public equity; and (iii) real estate.

The Company (as advised by the Investment Manager) intends to take a private equity approach to investment in predominately listed equities (and other financial products and instruments) in order to achieve enhanced returns by capitalising on the performance focussed characteristics of a private equity approach.

There are over 900 companies with a market capitalisation of below £500 million and over 700 small and medium sized companies, which the Investment Manager considers to be companies with a market capitalisation below £200 million, admitted to trading on AIM and the Main Market. These companies, in particular small and medium sized companies, typically have limited liquidity and low research coverage. The Board (as advised by the Investment Manager) believes that this lack of liquidity often results in undervaluation and may therefore lead to limited access to growth capital. The Board (as advised by the Investment Manager) considers that implementing a private equity approach to its investments can lead to increased returns by targeting these inefficiencies. The Directors anticipate that these conditions will lead to value creation opportunities where an active management approach is taken by both management of the relevant investee company and new cornerstone private equity investors.

In order to exploit the available market opportunities, the Company will focus mainly on investing in companies with strong fundamentals but which need support in: (i) returning to stable operational effectiveness ('wounded eagles'); and/or (ii) capital deployment and management support for internal and/or external growth.

Subscription Statistics

Admission is expected to become effective and dealings in the Shares to commence on AIM at 8.00 a.m. today. Financial and Nominated Adviser and Broker to the Company is Strand Hanson Limited.

For further information, please see the Company's admission document, a copy of which can be found on the Company's website at www.cipmerchantcapital.com or contact:

Overview of CIP Merchant Capital

Investment objective

The investment objective of the Company is to generate risk-adjusted returns for shareholders through investment in equity and equity-related products and instruments, by targeting appreciation in the value of its investments over the medium to longer term, principally through capital growth.

Investing policy

The Company will seek to achieve its investment objective through investing primarily in equity and other products and instruments of predominantly listed and quoted companies, where the Board (as advised by the Investment Manager) believes the relevant target company is undervalued and could benefit from strategic, operational or management initiatives, achieved through a private equity style investment philosophy.

The Company will invest primarily in equity and equity-linked securities (and related instruments), as well as debt, convertible debt and other financial instruments with equity characteristics, of companies that the Board (as advised by the Investment Manager) believes typically have at least two or more of the following characteristics:

· ability to achieve a superior risk adjusted return with a medium/long term target IRR of 20 per cent;

· cash generative (or expected to generate cash within a reasonable investment horizon);

· attractive management track records;

· strong fundamentals;

· potential for liquidity or exit within an identified time frame; and/or

· potential for the relevant company to have a competitive advantage.

Investments may either be active, being investments made directly by the Company, or passive, being indirect investments made by the Company through similar funds or investment vehicles. The Company may set up (and potentially co-invest in) funds (including cornerstone investments in specialist funds on preferred terms (which may include lower management fees)).

The Company will consider investments in a number of industries and sectors, particularly those in which the Directors and the Investment Manager have the necessary expertise and experience to be able to identify and manage the opportunity. It is expected that investments will predominantly be in the following industries:

· oil and gas;

· healthcare;

· pharmaceutical; and

· real estate.

Investments will typically (but will not all) be listed on a Western European stock exchange, with a predominant focus on the markets of the London Stock Exchange. The Company will invest in companies with a market capitalisation of (listed) or valued at (unlisted) less than £500 million at the time of investment and will focus largely on investment in companies with a market capitalisation of or valued at less than £200 million at the time of investment.

The Company's investment holding period and the exit strategy will depend on the underlying asset, exit opportunities and the size of the Company's investment. While the Directors intend to hold the Company's investments on a medium to long term basis, the Company may dispose of investments outside this timeframe should an appropriate opportunity arise where, in the Board's opinion (as advised by the Investment Manager), the value that could be realised from such disposal would represent a satisfactory return on the initial investment and/or otherwise enhance the value of the Company, taken as a whole. In addition, the Company will also make, from time-to-time smaller investments in short term trades, based on an attractive opportunistic view of value appreciation.

The Company will at all times invest and manage its investments in a manner which is consistent with the objective of spreading investment risk.

Investment restrictions

The Company will observe the following investment restrictions:

· the maximum investment in or exposure to any single investee company will be no more than 20 per cent. of the Net Asset Value at the time of investment;

· investments in or exposure to unlisted/unquoted companies will be limited to, in aggregate, 30 per cent. of the Net Asset Value at the time of investment;

· the maximum investment in or exposure to any investee company or fund that itself invests in a portfolio of investments will not exceed 10 per cent. of the Net Asset Value at the time of investment; and

· investments concentrated in any one sector or industry shall not exceed 50 per cent. of the Net Asset Value at the time of investment.

The Board expects the portfolio to be relatively concentrated, typically consisting of exposure to five to ten companies once fully invested.

Investment Opportunity

The Board (as advised by the Investment Manager) believes that there is opportunity to make investments in accordance with the Company's investing policy with the following characteristics:

· companies with strong fundamentals that need capital and/or management support and can benefit from the Company's involvement through the provision of capital and/or Investment Manager's management expertise to: (i) return to stable operational effectiveness; and/or (ii) to take advantage of and unlock growth opportunities; and

· companies generally with a market capitalisation of (listed) or valued at (unlisted) under

─ £500 million, in particular with a market capitalisation or valued at under £200 million, which have strong fundamentals but are deemed to be undervalued, for example due to unmet expectations or product or service liability, limited liquidity and lack of institutional shareholder following and/or acquirer/merger and acquisitions interest.

The Board (as advised by the Investment Manager) believes opportunities arise from investing in companies with the features outlined above because this provides the ability to:

· invest in tranches via specific brokers or over the counter with an ability to negotiate beneficially price, volumes, timing and terms and conditions with existing shareholders for the Company;

· exit through tranches via specific brokers, over the counter, through the market (once liquidity has improved) or through trade sales;

· negotiate discounts on existing price points as a result of persistent illiquidity; and

· actively manage value creation by:

─ exploiting internal cost-savings and business development; and

─ exert influence over an investee company through the Company's shareholding and, if appropriate, the Investment Manager's representation on its board of directors.

Group Structure

The Company has established the Merchant Capital Limited Partnership as a limited partnership in Guernsey under the Limited Partnerships (Guernsey) Law, 1995 (as amended) through which the Company will make its investments pursuant to its investing policy. The limited partners of the Merchant Capital Limited Partnership are the Company and the Investment Manager. The general partner of the Merchant Capital Limited Partnership is Merchant Capital GP, a wholly owned Guernsey subsidiary of the Company. The Directors also constitute the board of Merchant Capital GP and investment decisions will be taken by the Directors in their capacity as directors of the Company and in their capacity as directors of Merchant Capital GP (acting in its capacity as the general partner of the Merchant Capital Limited Partnership).

The Merchant Capital Limited Partnership has been established pursuant to the Merchant Capital Limited Partnership Agreement, pursuant to which the Investment Manager will receive a carried interest on the realisation of investments.

Board of Directors

Adrian Collins (Independent Non-Executive Chairman, aged 63)

Mr. Collins has worked in the fund management business for over 35 years, a large part of which was at Gartmore Investment Management Limited where latterly he was managing director. He is chairman of Liontrust Asset Management plc and is also on the boards of Bahamas Petroleum Company, City Natural Resources High Yield Trust plc, CQS New City High Yield Fund Limited and a number of other companies.

Marco Fumagalli (Non-Independent Non-Executive Director, aged 47)

Mr. Fumagalli has a significant transaction track-record as a Global Partner at the PE house 3i Group, with significant results in the management of investments in both private (e.g. Giochi Preziosi, Coelsanus Preserves and Vis Pharmaceuticals) and listed companies (e.g. Biosearch Italy and Datamat Novuspharma). From 2010 to 2013, he was responsible for managing the private equity activities within a Swiss family office. Mr. Fumagalli is a co-founder and principal of CIP and is currently a non-executive director of AIM quoted companies Sound Energy plc, Echo Energy Plc and Saffron Energy plc.

Carlo Sgarbi (Non-Independent Non-Executive Director, aged 53)

Mr. Sgarbi has over 20 years' experience in investment banking with IMI Group, part of Intesa Sanpaolo, a leading Italian banking group, which included being appointed Head of Debt Capital Markets in 1995 for Banca IMI, the investment bank of the Intesa Sanpaolo. Mr. Sgarbi was subsequently appointed Global Head of Fixed Income and Derivatives, Co-Head of Global Markets Equities and Derivatives, where he was responsible for managing approximately 300 professionals specialised in different areas of market activities and risk. From 2007 to 2013, he was responsible for managing all investment activities within a Swiss family office, which Mr. Fumagalli was also involved with from 2010. In 2013, he founded CIP along with Mr. Fumagalli and is a Managing Partner of CIP.

John Falla (Independent Non-Executive Director, aged 55)

Mr. Falla trained with Ernst & Young in London before moving to their Corporate Finance Department. On returning to Guernsey he worked for an international bank, before joining the Channel Islands Stock Exchange as a member of the Market Authority. In 2000, Mr. Falla joined the Edmond de Rothschild Group in Guernsey and provided corporate finance advice to clients including open and closed-ended investment funds and institutions with significant property interests. He was also a director of a number of Edmond de Rothschild Group operating and investment companies. Mr. Falla is now a non-executive director of a number of investment companies, the majority of which are listed on the London Stock Exchange, and a consultant. Mr. Falla is a Chartered Accountant and has a BSc Hons degree in Property Valuation and Management from The City University, London. He is a Chartered Fellow of the Chartered Institute for Securities and Investment having been awarded their diploma.

Robert King (Independent Non-Executive Director, aged 54)

Mr. King is a non-executive director for a number of open and closed ended investment funds including Chenavari Capital Solutions Limited and Weiss Korea Opportunities Fund Limited. Before becoming an independent non-executive director in 2011, he was a director of Cannon Asset Management Limited and its associated companies. Prior to this, he was a director of Northern Trust International Fund Administration Services (Guernsey) Limited (formerly Guernsey International Fund Managers Limited) where he had worked from 1990 to 2007. He has been in the offshore finance industry since 1986 specialising in administration and structuring of offshore open and closed ended investment funds.

Important notices

Capitalised terms used but not defined in this announcement have the same meaning as set out in the Admission Document published on 15 December 2017 unless the context otherwise requires.

The information contained in this announcement is for background purposes only and does not purport to be full or complete. No reliance may or should be placed for any purposes whatsoever on the information contained in this announcement or its accuracy, completeness or fairness. The information in this announcement is subject to change. However, the Company does not undertake to provide the recipient of this announcement with any additional information, or to update this announcement or to correct any inaccuracies, and the distribution of this announcement shall not be deemed to be any form of commitment on the part of the Company to proceed with any transaction or arrangement referred to in this announcement. This announcement has not been approved by any competent regulatory authority.

This announcement does not constitute an offer to sell, or the solicitation of an offer to acquire or subscribe for, Subscription Shares in any jurisdiction where such offer or solicitation is unlawful or would impose any unfulfilled registration, qualification, publication or approval requirements on the Company or Strand Hanson. The offer and sale of Subscription Shares has not been and will not be registered under the applicable securities laws of Canada, Australia, Japan, New Zealand or the Republic of South Africa. Subject to certain exemptions, the Subscription Shares may not be offered to or sold within Canada, Australia, Japan, New Zealand or the Republic of South Africa or to any national, resident or citizen of Canada, Australia, Japan, New Zealand or the Republic of South Africa.

The Subscription Shares have not been, and will not be, registered under the United States Securities Act of 1933, as amended (the "US Securities Act"), or the securities laws of any other jurisdiction of the United States. The Subscription Shares may not be offered or sold, directly or indirectly, in or into the United States (except pursuant to an exemption from, or a transaction not subject to, the registration requirements of the US Securities Act). No public offering of the Subscription Shares is being made in the United States. The Subscription Shares are being offered and sold only outside the United States in "offshore transactions" within the meaning of, and in reliance on, Regulation S under the US Securities Act ("Regulation S").

The Subscription Shares have not been approved or disapproved by the United States Securities and Exchange Commission, any state securities commission in the United States or any other regulatory authority in the United States, nor have any of the foregoing authorities passed on or endorsed the merits of the Subscription or the accuracy or adequacy of the information contained in this announcement. Any representation to the contrary is a criminal offence in the United States.

The securities referred to herein have not been registered under the applicable securities laws of Australia, Canada, Japan or the Republic of South Africa and, subject to certain exceptions, may not be offered or sold within Australia, Canada, Japan or the Republic of South Africa or to any national, resident or citizen of Australia, Canada, Japan or the Republic of South Africa.

The distribution of this announcement outside the United Kingdom may be restricted by law and persons into whose possession this announcement comes should inform themselves about and observe any such restrictions. No action has been taken by the Company or Strand Hanson that would permit a public offer of Subscription Shares in any jurisdiction outside the United Kingdom or possession of this announcement where action for that purpose is required. Persons outside the United Kingdom who come into possession of this announcement should inform themselves about the distribution of this announcement in their particular jurisdiction. Failure to comply with those restrictions may constitute a violation of the securities laws of such jurisdiction.

This announcement is directed only at persons who are: (i) if in a member state of the European Economic Area, qualified investors within the meaning of article 2(1)(e) of the Prospectus Directive ("Qualified Investors"); or (ii) if in the United Kingdom, Qualified Investors and fall within: (a) article 19(5) (investment professionals) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "Order"); or (b) a person to whom the Subscription may be lawfully communicated; or (iii) if in the Bailiwick of Guernsey, licensed under any of the Protection of Investors (Bailiwick of Guernsey) Law, 1987 (as amended), the Insurance Business (Bailiwick of Guernsey) Law, 2002 (as amended), the Banking Supervision (Bailiwick of Guernsey) Law, 1994 (as amended), or the Regulation of Fiduciaries, Administration Businesses and Company Directors, etc. (Bailiwick of Guernsey) Law, 2000 (as amended) (all such persons together being referred to as "Relevant Persons"). The term "Prospectus Directive" means Directive 2003/71/EC as amended and includes any relevant implementing measures in each member state of the European Economic Area.

This announcement must not be acted on or relied on by persons who are not Relevant Persons. Persons distributing this announcement must satisfy themselves that it is lawful to do so. Any investment or investment activity to which this announcement relates is available only to Relevant Persons and will be engaged in only with Relevant Persons. This announcement does not itself constitute an offer for sale or subscription of any securities in the Company. Strand Hanson, which is a member of the London Stock Exchange plc, is authorised and regulated in the United Kingdom by the Financial Conduct Authority and is acting as nominated adviser and broker to the Company for the purposes of the AIM Rules. Strand Hanson is not acting for, and will not be responsible to, any person other than the Company for providing the protections afforded to its customers or for advising any other person on the contents of this announcement or on any transaction or arrangement referred to in this announcement. Strand Hanson's responsibilities as the Company's nominated adviser under the AIM Rules are owed solely to the London Stock Exchange plc and are not owed to the Company, any Director or to any other person. No representation or warranty, express or implied, is made by Strand Hanson as to, and no liability is accepted by Strand Hanson in respect of, any of the contents of this announcement.

Apart from the responsibilities and liabilities, if any, which may be imposed on Strand Hanson by the Financial Services and Markets Act 2000 (as amended) or the regulatory regime established thereunder or under the regulatory regime of any other jurisdiction, Strand Hanson accepts no responsibility whatsoever for the contents of this announcement or for any other statement made or purported to be made by it, or on its behalf, in connection with the Group, the Investment Manager, the Subscription Shares or the Subscription. Strand Hanson accordingly disclaims all and any liability whether arising in tort, contract or otherwise (save as referred to above), which it might otherwise have in respect of such document or any such statement.

FORWARD-LOOKING STATEMENTS

This announcement includes forward-looking statements. These statements relate to, among other things, analyses and other information that are based on forecasts of future results and estimates of amounts not yet determinable. These statements also relate to the Group's future prospects, developments and business strategies.

These forward-looking statements are identified by the use of terms and phrases such as "anticipate", "believe", "could", "estimate", "expect", "intend", "may", "plan", "predict", "project", "will" or the negative of those variations, or comparable expressions, including references to assumptions. These statements are contained in all sections of this announcement. The forward-looking statements in this announcement, including statements concerning projections of the Group's future results, operating profits and earnings, are based on current expectations and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by those statements.

These forward-looking statements speak only as at the date of this announcement. The Company undertakes no obligation to update forward-looking statements or risk factors other than as required by the AIM Rules or applicable law, whether as a result of new information, future events or otherwise.

The price of shares and any income expected from them may go down as well as up and investors may not get back the full amount invested upon disposal of the shares. Past performance is no guide to future performance, and persons needing advice should consult an independent financial adviser.

Neither the content of the Company's website nor any website accessible by hyperlinks on the Company's website is incorporated in, or forms part of, this announcement

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