10 September 2019: Merian Chrysalis Investment Company Limited (Merian Chrysalis), the investment company advised by Merian Global Investors (MGI) has today announced its intention to raise £100 million plus, through a placing of new ordinary shares under its placing programme.
Merian Chrysalis was established in November 2018 as a closed-end investment company to invest in later-stage private companies. MGI could see the growing market for investment in high-growth, pre-IPO businesses and Merian Chrysalis was designed to capitalise on that opportunity. Since launch, the company’s shares have traded at a premium to net asset value (NAV), reflecting the strong demand for access to the underlying portfolio companies and the considerable appetite for access to this part of the market. Following a number of recent investments, the portfolio is approximately 80% invested and the management team has a pipeline of exciting opportunities, with a number of potential investments undergoing due diligence. As such, MGI is now seeking additional capital to execute the next phase of investment opportunities.
In addition to new capital, it is currently anticipated that approximately 50% of the proceeds will be used to scale-up Merian Chrysalis’s exposure to a number of the existing portfolio holdings (subject to certain consents being obtained). Following completion of the placing, the additional interests are expected to be acquired imminently from MGI’s open-ended UK small- and mid-cap equity funds at a modest discount to the latest available valuation¹ of those assets (in light of the saving of transaction fees outside of a company sponsored funding round). As a result, the acquisition is expected to be value accretive for Merian Chrysalis, with the added benefit that a substantial proportion of the placing’s net proceeds will be deployed quickly.
MGI believes this transaction will also be welcomed by investors in its open-ended funds, as recent events have resulted in a shift in perception of the role of unlisted investments in this type of vehicle. In its open-ended funds, MGI’s exposure to unlisted investments is within regulatory limits. Merian Chrysalis was established as the firm’s primary vehicle for investing in unquoted businesses. The recent market discussion about unlisted investments, combined with the ongoing demand for access to Merian Chrysalis, supports the firm’s strategy of transitioning certain shares from its open-ended funds to the investment company.
MGI believes that the underlying companies continue to represent a fantastic investment opportunity. Accordingly, the open-ended funds currently holding Merian Chrysalis will participate in the placing and will indirectly maintain exposure to the underlying companies. Following the proposed transaction, it is anticipated that MGI’s open-ended funds will also retain a smaller direct unlisted exposure to The Hut Group, TransferWise, Starling Bank and Secret Escapes.
It is anticipated that the new Merian Chrysalis shares will be issued at a premium to the latest available NAV, but a discount to the prevailing market price. Further guidance on pricing will be announced before the close of the placing.
Richard Watts, manager of Merian Chrysalis and the Merian UK Mid Cap Fund at Merian Global Investors, comments:
“Over the last decade there has been a significant increase in the number of businesses delaying an IPO due to the increasingly short-term focus of stock markets. Our scale and reputation in the smaller companies market has afforded us access to some of Europe’s most exciting private businesses and Merian Chrysalis was launched last year to exploit this growing opportunity. The strategy has continued to experience strong demand from investors and later-stage private businesses seeking capital from an experienced asset manager.
“Now Merian Chrysalis is approximately 80% invested, it is an opportune time to expand the portfolio and quickly capitalise on our strong pipeline of investment opportunities. By using approximately half of the proceeds to acquire additional stakes in existing holdings, investors will benefit from a well-balanced portfolio, as well as the continuation of a sufficient level of full investment.”
Dan Nickols, head of UK small- and mid-cap equities at Merian Global Investors, adds:
“Disruptive companies in the later stage of unquoted life represent an incredibly exciting investment opportunity and an asset class we believe will be highly profitable for our investors. We have always maintained a prudent approach to unlisted holdings, investing only in established businesses, combined with strict compliance oversight. While investors recognise the benefits of our approach, recent events have resulted in a heightened level of interest regarding this type of investment in open-ended funds. Having established Merian Chrysalis as the primary vehicle for unquoted investments, and received considerable demand for the strategy, now is an opportune time to transition a proportion of unquoted shares from our open-ended funds to the closed-ended strategy. We believe this is beneficial to Merian Chrysalis investors, who will scale-up their exposure to these exciting businesses, and to investors in our open-ended funds, as they can retain access to these attractive investments indirectly through their holding in Merian Chrysalis, while reducing their direct unlisted exposure, without bearing the costs of an open-market sale.”
Notes to editors
For more information on the placing, please read the announcement issued by Merian Chrysalis Investment Company Limited on 10 September 2019.
¹ Subject to any necessary adjustments in the event of any material change.
About Merian Global Investors
Merian Global Investors is a leading, independent, global asset management firm. The company as it is now known was formed in June 2018 when its management team, together with funds operated by the global growth private equity firm, TA Associates, acquired the “single-strategy” investment capabilities of Old Mutual Global Investors.
It is focused on delivering strong investment performance and customer-focused investment solutions that result in positive long-term outcomes. The business has no house view or CIO, allowing its fund managers the freedom to follow their own proven strategies.
The business had assets under management of £26.4 billion, as at 30 June 2019.
About Merian Chrysalis Investment Company Limited
Merian Chrysalis Investment Company Limited is a Guernsey-domiciled investment company traded on the London Stock Exchange. It aims to generate long-term capital growth through investing in a portfolio of fast-growing and highly disruptive unquoted companies. The Company’s investment adviser is the asset manager, Merian Global Investors, a leading public investor in the UK. Merian Global Investors has proven experience in the crossover investing space and has made investments in TransferWise, The Hut Group, Secret Escapes, Graphcore, Growth Street, Starling Bank, Embark Group, Klarna and Sorted.
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This communication is issued by Merian Global Investors (UK) Limited (“Merian Global Investors”), Millennium Bridge House, 2 Lambeth Hill, London, United Kingdom, EC4P 4WR. Merian Global Investors is registered in England and Wales (number: 02949554) and is authorised and regulated by the Financial Conduct Authority (FRN: 171847). This communication is for information purposes only. Nothing in this communication constitutes financial, professional or investment advice or a personal recommendation. This communication should not be construed as a solicitation or an offer to buy or sell any securities or related financial instruments in any jurisdiction. No representation or warranty, either expressed or implied, is provided in relation to the accuracy, completeness or reliability of the information contained herein, nor is it intended to be a complete statement or summary of the securities, markets or developments referred to in the document. Any opinions expressed in this document are subject to change without notice and may differ or be contrary to opinions expressed by other business areas or companies within the same group as Merian Global Investors as a result of using different assumptions and criteria. MGI 09/19/0027
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