CIP.L Regulatory News (CIP)

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM ANY JURISDICTION (INCLUDING THE UNITED STATES) WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF SUCH JURISDICTION.

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION.

For immediate release

23 March 2022

CIP MERCHANT CAPITAL LIMITED

("CIP" or the "Company")

Further Response to CFE's Final Offer and Unanimous Rejection

Further to the Company's announcement of 16 March 2022, in relation to the Final Offer by Corporation Financière Européenne S.A. ("CFE"), at a price of 60 pence per Ordinary Share, the Board announces, having duly considered the Final Offer and consulted with its financial adviser, Strand Hanson Limited, that, once again, it unanimously and unequivocally rejects the Final Offer.

The Company will shortly be posting a final response circular (the "Final Response Document") to CIP's shareholders in respect of the Final Offer, containing substantially the same content as set out herein.

In the meantime, the Board recommends that Shareholders should take no action and should not complete any Form of Acceptance sent to them by CFE.

A further announcement will be made on publication of the Final Response Document, which, along with the other requisite display documents, will be made available on the Company's website at: www.cipmerchantcapital.com.

1. Introduction

On 14 January 2022, CFE was obliged to announce, after unconditionally agreeing to acquire 1,091,000 Ordinary Shares (representing approximately 2.0 per cent. of the Company's issued ordinary share capital) at a price of 55 pence per Ordinary Share, an unsolicited mandatory cash offer, under Rule 9 of the City Code on Takeovers and Mergers (the "Code"), for the Ordinary Shares not already held by CFE (or any persons acting in concert with it) at a price of 55 pence per Ordinary Share.

On 16 March 2022, CFE announced an increased price in respect of its hostile, mandatory cash offer from 55 pence to 60 pence per Ordinary Share and declared such increased offer to be its final offer (the "Final Offer").

The Board strongly and unanimously believes that the Final Offer remains a highly opportunistic offer, which significantly undervalues CIP's current investment portfolio and the Company as a whole, such that it does not reflect an appropriate value for independent Shareholders.

Accordingly, as announced by the Company on 16 March 2022, the Directors unanimously reject the Final Offer and recommend that all independent Shareholders should also reject the Final Offer.

TO REJECT THE FINAL OFFER YOU NEED TAKE NO ACTION - SIMPLY DO NOT RETURN CFE'S FORM OF ACCEPTANCE OR TAKE ANY ACTION IN CREST.

This announcement sets out the considerations taken into account by the Directors in reaching their conclusion to reject the Final Offer.

2. Summary of Key Arguments

The key factors identified by your Board against the Final Offer can be summarised as follows:

· The Final Offer significantly undervalues CIP on reasonable and relevant NAV metrics, representing:

- a discount of approximately 29.4 per cent. to the Company's Latest NAV per Ordinary Share; and

- a discount of approximately 19.8 per cent. to the Company's Liquidity Adjusted NAV per Ordinary Share (as defined below)

· The Final Offer Price represents a premium of only 17.6 per cent. to the prevailing price of an Ordinary Share immediately prior to the commencement of the Offer Period, which the Directors believe is significantly below market norms for a premium in a hostile offer situation and which is not capable of recommendation

· On every trading day following the announcement of the Final Offer, the middle market closing price of the Company's Ordinary Shares has been at or above the level of the Final Offer Price, thereby serving to demonstrate the market's view on the Final Offer

· Since the announcement of the Final Offer, CIP's second largest shareholder, Castellain Capital LLP, has purchased further Ordinary Shares in the market at average levels above the Final Offer Price

· The Directors who hold Ordinary Shares, the principals of the Investment Manager (via their investment vehicle and personally, as applicable) and another significant Shareholder have all provided irrevocable undertakings to the Company NOT to accept the Offer, including any new, revised, improved or increased offer such as the Final Offer

· CFE has consistently failed to engage substantively with the Board in relation to their intentions for CIP's business, both prior to the Offer Period and, in particular, subsequent to the launch of the Offer and Final Offer. As such, the Board is surprised that CFE felt able to state in its offer document that "CFE has continued to be supportive of the business since it became a shareholder"

· CFE, despite this being its Final Offer, has remained vague as to its intentions for CIP, should it gain control of the Company, albeit it has made it clear that it would like, assuming valid acceptances and/or acquisitions of at least 75 per cent. of the voting rights in CIP are achieved, to procure the cancellation of the admission of the Ordinary Shares to trading on AIM and thereby remove access through the London Stock Exchange to trade the Ordinary Shares and the protections currently afforded to CIP Shareholders by virtue of its AIM quotation and compliance with the AIM Rules

- The Board would note that even if such 75 per cent. threshold was not achieved, but the acceptance condition to the Final Offer was nevertheless satisfied, with CFE achieving a resultant holding of 50 per cent. or more of the voting rights in CIP, if CFE requisitioned an extraordinary general meeting to propose a special resolution to cancel the admission of the Ordinary Shares to trading on AIM that resolution would only require the approval of 75 per cent. of those Shareholders present in person or by proxy, which is likely to be a lower threshold than 75 per cent. of the Company's issued ordinary share capital at that time

- Nevertheless, it is a possibility that CFE could successfully close its Final Offer with a resultant percentage ownership level, such that it is unable to procure the cancellation of the admission of the Ordinary Shares to trading on AIM, thereby leaving the Company, in the Board's view, in a strategic cul-de-sac

· CFE has also continued to be vague in its statements in relation to the identity of its intended replacement investment manager, merely stating in its offer document that "....CFE expects to have identified a suitable replacement within three months". The Board is surprised and disappointed, particularly in light of the length of time that CFE has had (having previously considered making a possible offer for CIP during the period from 28 September 2020 to 22 February 2021, having announced a mandatory cash offer under Rule 9 of the Code on 14 January 2022, and having announced its Final Offer on 16 March 2022), that CFE can provide no further clarity on this matter to CIP's other Shareholders, nor indeed provide any clarity as to the identity of any proposed representative to the Board simply stating that it "...may request the appointment of a representative to the Board of CIP" and that the "identity of any such appointee has not yet been confirmed"

- This is particularly pertinent, as, further to the above observation, CFE may end up as majority shareholder in the Company whilst CIP remains admitted to trading on AIM. The Board strongly believes that CFE should have provided more information to Shareholders on both the intended representative it would wish to appoint to the Board (if any) and the identity of its intended replacement investment manager

Accordingly, as announced by the Company on 16 March 2022, the Directors, once again, unanimously reject the Final Offer and recommend that all independent Shareholders should also similarly reject the Final Offer.

3. Background to the Final Offer and engagement with CFE

CFE has previously made a number of approaches to the Company, including via a letter dated 28 September 2020, and then a subsequent approach on 2 December 2020, in relation to a possible offer subsequently announced by CFE on 26 January 2021 at a price of 50 pence per Ordinary Share. The Board unequivocally and unanimously rejected such possible offer, believing it to be opportunistic and to significantly undervalue the Company at that time.

On 16 March 2022, CFE announced an increased and final cash offer, increasing the price of its hostile, mandatory cash offer from 55 pence to 60 pence per share for the Ordinary Shares in CIP not already held by CFE (or any persons acting in concert with it) and declaring such increased offer to be its final offer.

Between the time the Possible Offer was announced by CFE on 26 January 2021 and the expected end of the current Offer Period (assuming that CFE does not close the Final Offer prior to 1 April 2022), the Company will have been in a Code offer period for 107 days (inclusive) and subject to its obligations thereunder including the Code's rules in relation to frustrating action during an offer period, further restricting the Company's ability to execute on its strategy.

The Company's Chairman made numerous attempts to engage with CFE following the launch of CFE's initial Offer and has, to date, had no meaningful response from, or engagement with, CFE in relation to its intentions for CIP's business. 

The Board further notes that, since the time of CFE's initial approach in September 2020, the Company's weekly unaudited NAV has increased by approximately 13.7 per cent. (from 25 September 2020 to 18 March 2022, as announced on 29 September 2020 and 22 March 2022, respectively).

The Board would further note, in relation to the discount of an Ordinary Share to the latest NAV per Ordinary Share, that it has proposed a resolution at two annual general meetings of the Company, held on 26 June 2020 and 10 September 2021 respectively, that would have authorised the Company to conduct a share buyback programme, with a view to managing such discount as is normal for a closed-ended investment company of CIP's nature. Such resolution was not passed by Shareholders on both occasions.

Accordingly, the Company has not been able to buy back any Ordinary Shares as part of a standard discount control mechanism. The Board believes that such discount control mechanism, had it been approved, would have provided it with greater flexibility when considering how best to address any imbalance between the supply of and demand for the Ordinary Shares, from time to time, in order to help manage the discount of the market price of the Ordinary Shares to the NAV per Ordinary Share. This is a matter that the Board would have discussed with CFE had it been able to open a dialogue - sadly, this has not been possible.

The Board believes that the opportunistic nature of the Final Offer has been recognised by the market and clearly reflected in its reaction to the Final Offer, with the middle market closing price of an Ordinary Share having been at or above the Final Offer Price on every trading day following CFE's announcement of the Final Offer to 22 March 2022 (being the latest practicable date prior to the date of this announcement).

The Board remains cognisant of its responsibility to, inter alia, maximise value for all Shareholders, and seeks to give due consideration to all options available to meet this obligation, bearing in mind the current restrictions the Company is operating under as a result of the Code's frustrating actions regime and the inability of the Company to re-purchase Ordinary Shares as part of a standard discount control mechanism.

The Board intends to discuss this further with interested Shareholders following conclusion of the Offer Period and has already spoken to a number of the Company's significant Shareholders during the Offer Period.

4. Rationale for rejection of the Final Offer

In assessing the Final Offer, the Board has consulted with the Investment Manager as to the analysis of the Final Offer set out herein such that it also reflects their views.

(a) Discount of the Final Offer Price to the NAV per Ordinary Share

The Board notes that the Final Offer values the entire issued ordinary share capital of CIP at £33 million and that the Final Offer Price represents:

· a discount of approximately 29.4 per cent. to the Company's latest published unaudited NAV per Ordinary Share of 85.0 pence as at 18 March 2022; and

· a discount of approximately 19.8 per cent. to the NAV per Ordinary Share of the Company's quoted equity investments and cash and cash equivalents less net current liabilities ("Liquidity Adjusted NAV per Ordinary Share"), which was, as at 18 March 2022, 74.8 pence per Ordinary Share.

For illustrative purposes only, the Board has also considered the Final Offer in the context of an adjusted NAV calculation to remove the cash and cash equivalents component of its Latest NAV, being £5.0m (approximately 9.2 pence per Ordinary Share). The prevailing NAV adjusted to exclude such cash and near cash equivalents is approximately £41.7m or 75.8 pence per Ordinary Share (the "Cash Adjusted NAV" and "Cash Adjusted NAV per Ordinary Share"). To enable a like for like comparison, adjusting the Final Offer Price on the same basis derives an adjusted offer price per Ordinary Share of 50.8 pence (the "Cash Adjusted Final Offer Price").

The Cash Adjusted Final Offer Price represents a significant discount of approximately 33.0 per cent. to the Cash Adjusted NAV per Ordinary Share.

The Board notes that the Company's investment portfolio (summary details of which are set out in Appendix II to this document) is predominantly comprised of quoted equity investments, which account for approximately 86.6 per cent. of its total investments (excluding UK Treasury bills).

Accordingly, the Liquidity Adjusted NAV per Ordinary Share has been calculated to assess the Final Offer in the context of the Company's more liquid portfolio assets only by removing the investments that are not actively traded and the unquoted investments (further details of which are set out in Appendix II).

The Final Offer Price of 60 pence per Ordinary Share represents a discount of 19.8 per cent. to the Liquidity Adjusted NAV per Ordinary Share as at 18 March 2022, being 74.8 pence per Ordinary Share, comprising quoted equities and cash and near cash equivalents less other net current liabilities.

Since the Possible Offer was announced on 26 January 2021, the NAV per Ordinary Share has increased by 11.2 per cent. from 76.4 pence per share, as at 29 January 2021, to 85.0 pence per Ordinary Share as at 18 March 2022, being the Company's latest published unaudited NAV per Ordinary Share.

The Board would note that the middle market price per Ordinary Share has also closed above the Final Offer Price of 60 pence on every trading day since announcement of the Final Offer.

(b) A comparison of the Final Offer Price to the price of the Ordinary Shares

The Final Offer represents a small premium or discount to each of the most relevant share price metrics, including:

· a premium of only 17.6 per cent. to the closing middle market price of an Ordinary Share of 51.0 pence at the close of business on 13 January 2022, being the latest practicable date prior to the commencement of the Offer Period;

· a premium of only 13.6 per cent. to the 12 month volume weighted average price of an Ordinary Share of 52.8 pence to 13 January 2022, being the latest practicable date prior to the commencement of the Offer Period;

· a premium of only of 7.8 per cent. to the average middle market closing price for the 12 month period ended on and including 13 January 2022 of 55.7 pence;

· a discount of approximately 7.0 per cent. to the middle market closing price of 64.5 pence per Ordinary Share on 22 March 2022 (being the latest practicable date prior to the date of this announcement); and

· a premium of only 1.4 per cent. to the volume weighted average price of an Ordinary Share of 59.2 pence from commencement of the Offer Period on 14 January 2022 to 22 March 2022 (being the latest practicable date prior to the date of this announcement).

(c) Market purchases by pre-existing significant CIP Shareholders

The Board notes that, from and including 16 March 2022, being the date of CFE's announcement of the Final Offer, to 22 March 2022, being the latest practicable date prior to the date of this announcement, there have been further market purchases by a pre--existing significant Shareholder in CIP at average levels in excess of the Final Offer Price (aggregated over the period) as evidenced by Dealing Disclosures pursuant to Rule 8.3 of the Code:

In addition, the closing middle market price of an Ordinary Share has been at, or above, the Final Offer Price on every trading day following the announcement of the Final Offer, thereby suggesting to the Board that the market supports the Board's view that the Offer undervalues the Company.

(d) Successful exits from investments and update with regard to CareTech Holdings plc

The Company and the Investment Manager continue to seek to generate risk-adjusted returns for Shareholders through capital appreciation, investing primarily in equity and equity-related products and instruments and taking a private equity approach over a medium to long term investment horizon.

The Investment Manager monitors and analyses key markets and target sectors to identify attractive opportunities where there is a strong fundamental business case for investment, particularly in the current uncertain market environment, with the aim of generating future long-term value for Shareholders.

CFE, in the Final Offer Document, refers to the discount of the Ordinary Shares being greater than the average discount to NAV of the constituents of the Association of Investment Companies' (the "AIC") Flexible Investment sector (of which CIP is one). The Board is pleased to note that the Company's NAV has increased more than the average level of NAV growth within the constituent companies of the AIC Flexible Investment Sector over the 12 month period to 22 March 2022 (being the latest practicable date prior to the date of this announcement).

Since August 2020, the Company has successfully exited three investments, being:

· Circassia Group plc (corresponding to a 1.4 times cash on cash return and internal rate of return of 72 per cent., as announced on 1 September 2020);

· Proactis Holdings plc (corresponding to a 2.3 times cash on cash return and internal rate of return of 45 per cent., as announced on 28 July 2021); and

· Vertu Motors plc (corresponding to a 1.6 times cash on cash return and internal rate of return of 108 per cent., as announced on 9 December 2021). 

Notwithstanding the positive exits achieved to date, the Board is cognisant that the NAV per Ordinary Share has still to reach the level at the time of the Company's admission to trading on AIM. Although the Board continues to have confidence in the investment strategy of the Investment Manager, as part of its ordinary course Shareholder communication process, on conclusion of the Offer Period, the Board will seek to consult with CIP's major Shareholders in order to assess their feedback on CIP and the Investment Manager's performance.

The Board is also pleased to note the announcement released by CareTech Holdings plc ("CareTech") on 7 March 2022, stating that Sheikh Holdings Group (Investments) Limited, the family office of Haroon and Farouq Sheikh, Group CEO and Group Executive Chairman of CareTech respectively, is in the early stages of forming a consortium for the purpose of considering making a possible offer for the entire issued, and to be issued, share capital of CareTech.

Whilst there can be no certainty that a formal offer will be made, nor the terms of any such offer, CareTech's share price has increased from £5.86 (on 4 March 2022, being the latest middle market closing price prior to CareTech's announcement of 7 March 2022) to £6.98 as at market close on 22 March 2022 (being the latest practicable date prior to this announcement), and the Board believes that Sheikh Holdings Group (Investments) Limited's stated intentions may provide a near-term opportunity to realise CIP's investment in CareTech, which, at the currently prevailing market price of CareTech's ordinary shares (as at market close on 22 March 2022), would have a value of approximately £9.7 million (having been acquired by CIP for aggregate consideration of £5.1 million).

The Board and Investment Manager remain confident that, over the medium term, further opportunities for value enhancing exits will emerge and create value for CIP Shareholders.

Accordingly, the Directors believe that the Final Offer undervalues CIP, in respect of the low premium to the prevailing market price per Ordinary Share immediately prior to the Offer Period, the discount to the currently prevailing market price per Ordinary Share (as at market close on 22 March 2022), and, most pertinently, the significant discount to the prevailing NAV per Ordinary Share, the Liquidity Adjusted NAV per Ordinary Share and the Cash Adjusted NAV per Ordinary Share.

5. Implications for CIP Shareholders of CFE becoming a majority Shareholder and the Board's views on the effect of the implementation of the Final Offer on CIP's interests, employees and locations

Immediately prior to CFE's share purchase on 14 January 2022, CFE was already CIP's largest Shareholder, with an aggregate interest of 29.81 per cent. in the Company's issued ordinary share capital. Following settlement of the acquisition of 1,091,000 Ordinary Shares at a price of 55 pence per Ordinary Share on 14 January 2022, and subsequent acquisitions of, in aggregate, 1,879,304 Ordinary Shares at a price of 55 pence per Ordinary Share and 69,000 Ordinary Shares at a price of 59 pence per Ordinary Share, CFE's latest disclosed holding is 19,438,621 Ordinary Shares representing 35.3 per cent. of the Company's issued ordinary share capital.

CFE had, as at 1.00 p.m. on 21 March 2022, received valid acceptances in respect of its Final Offer from shareholders holding, in aggregate, 696,805 Ordinary Shares representing approximately 1.27 per cent. of the Company's currently issued share capital.

If CFE receives sufficient acceptances of the Final Offer, and/or otherwise acquires Ordinary Shares, to increase its interest to 50 per cent. or more of the Company's voting rights, CFE will have significantly more influence over the Company and the Board believes that it could use its voting power as a majority Shareholder to take actions that may be to the potential detriment of other Shareholders.

Specifically, the Directors draw your attention to the fact that, on any ordinary resolution put to Shareholders, CFE would be able to carry the vote unilaterally. Shareholders should also be aware that, in the event that CFE's interests reach 75 per cent. of the Company's voting rights following completion of the Offer, CFE's ability to carry the vote and lack of influence by other Shareholders would extend to any special resolution put to Shareholders.

The Board notes that, in the Final Offer Document, CFE states that if the Offer becomes, or is declared, unconditional in all respects, in accordance with its terms, CFE intends to terminate the investment management agreement dated 15 December 2017 between CIP and Merchant Capital Manager Limited in accordance with the agreement's terms. CFE states that it would intend to appoint a new investment manager but has not yet concluded, despite the significant amount of time that has passed since it made its initial Offer, upon which investment manager it would intend to appoint. CFE further states that it expects to have identified a suitable replacement within three months but provides no guarantee as to when that might be.

The Board strongly feels that CFE's intentions are vague and lack both detail and substance and has been unable, given CFE's lack of response to multiple requests for dialogue, to access any further details with regard to CFE's strategic vision, if such vision exists, beyond acquiring CIP at a very significant discount to the prevailing NAV.

The Board reiterates that the Company has sought to engage directly with CFE, via its Chairman, on numerous occasions both prior to and since the time of the Offer and has had no engagement with CFE in relation to its intentions for CIP's business, beyond those set out in CFE's public announcements, its initial Offer Document and the Final Offer Document.

Accordingly, one further reason for rejecting the Final Offer is that if CFE receives sufficient acceptances of the Final Offer and/or otherwise acquires further Ordinary Shares to increase its interests to 50 per cent. or more of the Company's voting rights, CFE could thereafter, at a duly convened extraordinary general meeting of the Company, unilaterally pass ordinary resolutions, requiring, inter alia, changes to the Board, following which they could procure the termination of the Investment Manager's appointment.

As a consequence, subject to the AIM Rules, CFE would be able to make changes to the Board composition of CIP, change CIP's Nominated Adviser and ensure the success of any ordinary resolution, regardless of the voting of other Shareholders and the requirement for good corporate governance.

Further, if CFE by virtue of potential further purchases and/or valid acceptances of the Offer, acquires Ordinary Shares carrying 75 per cent. or more of the voting rights attaching to the ordinary share capital of CIP, it intends to procure that CIP will make an application to cancel trading in the Ordinary Shares on AIM ("Cancellation").

In such event, Shareholders who continue to hold Ordinary Shares at the time of such Cancellation will no longer be able to trade the Ordinary Shares on AIM and the liquidity and marketability of the Ordinary Shares will be significantly reduced; furthermore, the Company would no longer be subject to the AIM Rules and the protections afforded to Shareholders thereunder, including good corporate governance, particularly with regard to related party transactions under AIM Rule 13 and would no longer retain a Nominated Adviser. However, it should be noted that the conflicts of interest provisions set out in the Guernsey Registered Collective Investment Schemes and Guidance 2021 would continue to apply. These provisions broadly require related party transactions to be undertaken on terms at least as favourable as arm's length terms.

The Board would note that even if the abovementioned 75 per cent. threshold was not to be achieved, but the acceptance condition to the Offer was nevertheless satisfied with CFE achieving a resultant holding of 50 per cent. or more of the voting rights in CIP, if CFE requisitioned an extraordinary general meeting to propose a special resolution to cancel the admission of the Ordinary Shares to trading on AIM, that resolution would only require the approval of 75 per cent. of those Shareholders present in person or by proxy, likely to be a lower threshold than 75 per cent. of the Company's issued ordinary share capital at that time.

If CFE, by virtue of potential further purchases and/or valid acceptances of its Offer, acquires Ordinary Shares carrying 75 per cent. or more of the voting rights attaching to the ordinary share capital of CIP, if it requisitioned an extraordinary general meeting to propose a special resolution to approve the voluntary liquidation of the Company, that resolution could be unilaterally passed by CFE.

The Board notes that CIP has no employees and, therefore, does not operate any pension scheme, nor does it have any arrangement in place for any employee involvement in its capital. Furthermore, CIP has no fixed assets or research and development function.

6. Current trading

Current trading since the Company's latest published weekly NAV has been in line with expectations.

The Company confirms that no investments or disposals have been made since the publication of the Company's previous Defence Circular on 14 February 2022 other than those which have been publicly announced.

The Board acknowledges that, in light of the current uncertain macro-economic climate, in particular as a result of the ongoing conflict in Ukraine, financial markets have been negatively impacted over recent weeks and the outlook for financial markets and economic growth more generally has worsened. .

Nonetheless, whilst the Board is mindful of current market volatility and the need to protect Shareholders' investment in the Company, the Board remains confident in the Company's investment strategy and believes that, over the medium term, further opportunities for value enhancing exits will emerge and create value for CIP Shareholders..

7. Recommendation of the Board

Your decision as to whether to accept the Final Offer will depend upon your individual circumstances. If you are in any doubt as to what action you should take, you should seek your own independent professional advice.

However, the Directors, who have been so advised by Strand Hanson as to the financial terms of the Final Offer, consider that the Final Offer significantly undervalues the Company and, in light of this, unanimously recommends that Shareholders reject the Offer. Strand Hanson is providing independent financial advice to the Directors for the purposes of Rule 3 of the Code and, in doing so, has taken into account the commercial assessments of the Directors.

Accordingly, the Directors unanimously recommend that YOU SHOULD REJECT THE FINAL OFFER and SHOULD NOT return CFE's form of acceptance. The Final Offer does not represent fair value for your Company and CFE do not deserve to capture control of the Company at such a significant discount to NAV and with such vague and limited plans for its future.

If you have already accepted the Final Offer, a summary of your rights of withdrawal is set out in paragraph 3 of Section B of Part II of the original Offer Document.

The Directors who hold Ordinary Shares representing, in aggregate, approximately 0.11 per cent. of the Company's issued ordinary share capital have irrevocably undertaken not to accept the Final Offer in respect of their own beneficial interests in such Ordinary Shares.

In addition, three other CIP Shareholders, including the investment vehicle and, where applicable, personal interests of Messrs Fumagalli and Sgarbi, being the principals of the Investment Manager, have also irrevocably undertaken not to accept the Final Offer in respect of their holdings of Ordinary Shares representing, in aggregate, approximately a further 13.16 per cent. of the Company's issued ordinary share capital.

Together, these irrevocable undertakings represent, in aggregate, approximately 13.27 per cent. of the Company's issued ordinary share capital.

APPENDIX IDEFINITIONS

The following definitions and technical terms apply throughout this announcement, unless the context otherwise requires:

"AIC" Association of Investment Companies;

"AIM" AIM, a market operated by the London Stock Exchange;

"AIM Rules" the AIM Rules for Companies published by the London Stock Exchange (as amended from time to time);

"Bloomberg" Bloomberg L.P., a financial software services, news and data company;

"Board" or "Directors" the board of directors of the Company;

"Business Day" a day (other than a Saturday, Sunday or UK public holiday) on which clearing banks in the City of London are open for the transaction of general commercial business;

"CFE" Corporation Financière Européenne S.A. incorporated in Luxembourg with company number B82680, in its capacity as discretionary investment manager, acting on behalf of the CFE Funds;

"CFE Funds" Corporation Financière Européenne S.A. Fund and accounts managed by CFE;

"CIP" or the "Company" CIP Merchant Capital Limited;

"CIP Shareholders" or together the registered holders of Ordinary Shares (each individually

"Shareholders" a "Shareholder");

"Code" or "Takeover Code" the City Code on Takeovers and Mergers in the UK issued by the Panel;

"Final Offer" the final cash offer made by CFE, as announced on 16 March 2022, to acquire the entire issued Ordinary Shares not already held by CFE or any persons acting in concert with it, as further detailed in the Final Offer Document;

"Final Offer Document" the document containing the Final Offer sent by CFE to CIP Shareholders on 18 March 2022;

"Final Offer Price" 60 pence in cash, being the consideration payable by CFE for each Ordinary Share under the terms of the Final Offer;

"Final Response Document" the circular that will be sent by CIP to Shareholders in respect of the Final Offer, containing substantially the same consent as set out herein;

"Guernsey" the Bailiwick of Guernsey;

"Group" the Company and its subsidiaries and subsidiary undertakings;

"IFRS" International Financial Reporting Standards as adopted by the European Union;

"Investment Manager" Merchant Capital Manager Limited, the Investment Manager to the Company, an affiliate of Continental Investment Partners S.A.;

 "Latest NAV" the Company's unaudited NAV per Ordinary Share of 84.99 pence as at 18 March 2022 and announced on 22 March 2022;

"London Stock Exchange" London Stock Exchange plc, a public company incorporated in England and Wales under number 2075721, together with any successors thereto;

"NAV" net asset value of the Company;

"NAV per Ordinary Share" the NAV divided by the number of existing Ordinary Shares;

"Offer" the mandatory cash offer made by CFE to acquire the entire issued Ordinary Shares not already held by CFE or any persons acting in concert with it, as further detailed in the Offer Document;

"Offer Document" the document containing the Offer sent by CFE to CIP Shareholders on 31 January 2022;

"Offer Period" the period commencing on 14 January 2022 and ending on the date when the Final Offer becomes or is declared unconditional or lapses or is withdrawn;

"Ordinary Shares" the existing issued or unconditionally allotted and paid (or credited as fully paid) Ordinary Shares of no par value in the capital of CIP and any further Ordinary Shares which are unconditionally allotted or issued fully paid (or credited as fully paid) on or prior to the date on which the Final Offer closes;

"Panel" the UK Panel on Takeovers and Mergers;

"Possible Offer" the possible offer at a price of 50 pence per Ordinary Share announced by CFE on 26 January 2021 pursuant to Rule 2.4 of the Code;

"Restricted Jurisdiction" subject always to the requirements of Rule 23.2 of the Code in relation to the distribution of offer documentation to jurisdictions outside the UK, any jurisdiction where extension of the Final Offer would violate the laws of that jurisdiction;

"Strand Hanson" Strand Hanson Limited, being the financial adviser, nominated adviser and broker to the Company;

"UK" or "United Kingdom" the United Kingdom of Great Britain and Northern Island and its dependent territories;

"US" or "United States" the 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 and any political subdivision thereof.

All references to "GBP", "pounds", "pounds sterling", "Sterling", "£", "pence", "penny" and "p" are to the lawful currency of the United Kingdom.

In this announcement, references to the singular include the plural and vice versa, unless the context otherwise requires and words importing the masculine gender shall include the feminine or neutral gender.

Any references to any provision of any legislation shall include any amendment, modification, re-enactment or extension thereof.

APPENDIX II

SOURCES OF INFORMATION AND BASES OF CALCULATION

In this announcement, unless otherwise stated or the context otherwise requires, the following bases and sources have been used:

1. As at 22 March 2022, being the latest practicable date prior to the date of this announcement, and as at 18 March 2022, being the date of the Company's Latest NAV calculation, CIP had 55,000,000 Ordinary Shares in issue.

2. Unless otherwise stated, all prices for the Ordinary Shares are middle market closing prices as derived from the AIM Appendix to the Daily Official List published by the London Stock Exchange for the particular date(s) concerned.

3. The volume weighted average prices for the Ordinary Shares are, in all cases, derived from Bloomberg's daily volume weighted average price data and have been rounded to the nearest two decimal places.

4. The unaudited NAV of CIP as at 18 March 2022 has been derived from the latest weekly calculation of unaudited NAV per Ordinary Share by the Company's administrator, Maitland Administration (Guernsey) Limited ("Maitland"), as notified by the Company on 22 March 2022. As set out in the Company's AIM admission document dated 15 December 2017, such weekly unaudited NAVs are calculated on the same basis as the calculation of the NAV per Ordinary Share for the purposes of the Company's published financial statements and, accordingly, are calculated in accordance with International Financial Reporting Standards ("IFRS") on the basis of market value using bid prices for listed and actively traded investments, with unlisted investments priced using the last quarterly valuation by the Investment Manager in accordance with The International Private Equity and Venture Capital Valuation (IPVEC) Guidelines. Accordingly, bid prices and foreign exchange rates used by Maitland to calculate the Company's Latest NAV were derived from Bloomberg and the Investment Manager's last quarterly valuation of the unlisted investments.

An unaudited summary of CIP's underlying investments and their carrying values, cash and cash equivalents and other net current liabilities as at 18 March 2022, pursuant to the Latest NAV calculation, is set out in the table below, which together with the number of Ordinary Shares in issue as at 18 March 2022 (as stated in section 1 above), forms the basis of the Latest NAV and derivation of the Cash Adjusted NAV, Liquidity Adjusted NAV and Cash Adjusted Final Offer Price referred to in this announcement. The figures in the table below have been rounded to the nearest whole number, such that there are marginal differences between the sum of the carrying values and the subtotals and totals thereof.

Notes:

* - Eurobond, which is not actively traded and currently valued at a 15 per cent. discount to its nominal face value, as set out in the Company's interim results announced on 30 September 2021.

** - holding company for the Company's Alkemy SpA investment.

5. The Liquidity Adjusted NAV has been calculated as the total value of the quoted equity investments (per section 4 above) plus the total of cash and near cash equivalents less other net current assets (per section 4 above) divided by the number of Ordinary Shares in issue (per section 1 above).

6. The Cash Adjusted NAV has been calculated as Total NAV (per section 4 above) minus the total of cash and near cash equivalents (per section 4 above). The Cash Adjusted NAV per Ordinary Share has been calculated as the Cash Adjusted NAV divided by the number of Ordinary Shares in issue (per section 1 above).

7. The Cash Adjusted Final Offer Price has been calculated as the Final Offer Price minus the total of cash and near cash equivalents (per section 4 above) divided by the number of Ordinary Shares in issue (per section 1 above).

8. Quoted equity investments as a percentage of total investments (excluding UK Treasury bills) has been derived using the relevant totals (per section 4 above).

9. Historical NAV data for the AIC Flexible Investment Sector was sourced from Bloomberg.

10. Details of the market purchases by a pre-existing significant CIP Shareholder were obtained from a disclosure, made pursuant to Rule 8 of the Code, by the relevant Shareholder and the average price paid per Ordinary Share was calculated as the aggregate amount paid for the Ordinary Shares divided by the number of Ordinary Shares acquired for the period concerned.

11. The number of days that the Company has been, and is expected to be, in a Code offer period has been calculated as the aggregate number of days between 26 January 2021 and 23 February 2021, and between 14 January 2022 and 1 April 2022, inclusive.

12. The percentage increase in the Company's unaudited NAV from 25 September 2020 to 18 March 2022 was calculated using the Company's publicly disclosed NAVs of 74.76 pence and 84.99 pence per Ordinary Share, respectively.

13. The value of the Final Offer has been calculated by multiplying the Final Offer Price of 60 pence per Ordinary Share by the 55,000,000 Ordinary Shares in issue.

14. The discount to the average middle market closing price for the 12-month period ended on and including 13 January 2022 was calculated by taking the mean average of Bloomberg's daily middle market closing prices over such period.

15. The middle market closing prices for the Ordinary Shares for the trading days period following the announcement of the Final Offer to 22 March 2022 were sourced from Bloomberg.

Enquiries:

Additional information

The information contained in this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 (which applies in the United Kingdom by operation of the European Union (Withdrawal) Act 2018 (as amended)). The person responsible for arranging release of this announcement on behalf of CIP is Adrian Collins.

Strand Hanson Limited ("Strand Hanson"), which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting exclusively as financial adviser, nominated adviser and broker to CIP and no-one else in relation to the Final Offer and/or other matters described in this announcement and will not be responsible to anyone other than CIP for providing the protections afforded to clients of Strand Hanson nor for providing advice in relation to the Final Offer, the contents of this announcement or any other matter referred to herein. Neither Strand Hanson 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 Strand Hanson in connection with the Final Offer, this announcement, any statement contained herein or otherwise.

Publication on a website

In accordance with Rule 26.1 of the Code, a copy of this announcement will be made available on CIP's website at: www.cipmerchantcapital.com (subject to certain restrictions relating to persons resident in restricted jurisdictions) by no later than 12 noon (London time) on 24 March 2022. For the avoidance of doubt, the content of the website referred to in this announcement is not incorporated into and does not form part of this announcement.

Availability of hard copies

Shareholders may request hard copies of any document published on the Company's website in connection with the Final Offer by contacting the Company's registrar at: Computershare Investor Services (Guernsey) Limited, 13 Castle Street, St Helier, Jersey JE1 1ES (telephone number: +44 (0)370 707 4040 or email: info@computershare.co.je). Shareholders may also request that all future documents, announcements and information to be sent to them in relation to the Final Offer should be in hard copy form.