Mercia Asset Regulatory News (MERC)

Mercia Technologies PLC

("Mercia", "the Company" or "the Group")

Sale of Allinea Software Limited to ARM Limited

Mercia Technologies PLC (AIM: MERC), a national investment group focused on the creation, funding and scaling of innovative technology businesses with high growth potential from the UK regions, is pleased to announce the sale of Allinea Software Limited ("Allinea") to ARM Limited ("ARM"), the world's leading semiconductor IP company, for a total cash consideration of up to £18.1million. The sale represents a return of circa 21x on the original investment cost.

Allinea, based in Warwick, is a leading provider of software tools for developing and optimising high performance computing applications. This cash exit demonstrates how early-stage businesses can be effectively supported through Mercia's 'Complete Capital Solution'. In 2009, Mercia identified the investment opportunity and led the funding of a management buyout of Allinea from another University of Warwick spinout. Mercia's third party managed funds provided early-stage investment and support. Following a period of successful trading, Allinea then became one of the Group's original direct investments ('Emerging Stars') at the time of Mercia's IPO in December 2014. Mercia's direct holding increased from 6.9% at IPO, to 16.6% as at 30 September 2016 via its purchase of the Mercia Fund 2 investment portfolio in 2015.

Allinea's platform is able to address high performance computing software development, debugging and performance optimisation through the use of its core products. Allinea has offices in the United States, Europe and Japan, and its software is used in circa 70% of the world's largest supercomputers. It has built relationships with many notable, blue-chip customers and partners.

With backing from Mercia, Allinea was scaled into a profitable, cash generative and dividend paying business over a period of seven years and Allinea's board has now successfully completed a competitive sale process.

This first Emerging Star divestment represents a substantial return for Mercia, which will receive initial proceeds of £2.6million (net of transaction expenses) with a further £0.3million held in escrow for up to 18 months in respect of customary closing working capital calculations and potential warranty claims. Mercia will recognise an immediate realised gain of £0.7million, compared with the holding value of £1.9million as at 30 September 2016. Mercia's total investment cost is £1.5million, so the initial proceeds of £2.6million represents a 73% uplift.

Dr Mark Payton, CEO of Mercia Technologies PLC, said:

"This planned divestment is a pleasing endorsement of Mercia's Complete Capital Solution, showing how Mercia sources and invests in attractive investment opportunities at an early stage. Initially this is undertaken via the managed funds, subsequently scaling those assets through direct investment which have the potential, ultimately, to be acquired by top-tier buyers. The sale of Allinea to ARM is a testament to the value held within our investment portfolio and will enable Allinea to accelerate its development and reach within the growing high performance computing markets, as well as achieving greater exposure in adjacent segments such as machine learning. As a Midlands-based business, this is further evidence of the hidden value we are able to unearth from the UK regions and our university partnerships."

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About Mercia Technologies PLC

Mercia is a national investment group focused on the creation, funding and scaling of innovative businesses with high growth potential from the UK regions. Mercia benefits from 18 university partnerships and six offices across the Midlands, the North of England and Scotland providing it with access to high quality, regional deal flow. Mercia Technologies PLC is quoted on AIM with the epic "MERC".

Mercia's 'Complete Capital Solution' initially nurtures businesses via its third party funds (with more than £228.0million under management) and then over time Mercia can provide further funding to its 'Emerging Stars' by deploying direct investment follow-on capital from its own balance sheet.

Since its IPO in December 2014, the Company has invested over £30.0million directly across its portfolio of 'Emerging Stars'.

About Allinea

Allinea creates powerful development and performance analysis tools that enable developers and users of software in high performance computing to create and deploy applications that achieve the most efficient use of their systems.

The company's software is now used in 70% of the world's largest supercomputers. Its customers are the leaders in government supercomputing, such as the US Department of Energy, NOAA, NASA and CEA as well as major Fortune 500 companies including Shell, Emerson, Oracle and Corning, and research groups and educators at universities such as Princeton, Stanford, Cambridge and Edinburgh.