MERC Mercia Asset Management Plc

Mercia Asset Management PLC

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

Publication of Annual Report and Notice of AGM

Mercia Asset Management PLC (AIM: MERC), the proactive regionally focused, specialist alternative asset manager with c.£1.8billion of assets under management ("AuM"), announces that it has published its Annual Report and Accounts for the year ended 31 March 2024.

An electronic copy of the Annual Report and Accounts is now available on the Company's website at www.mercia.co.uk/annual-report-2024/

Printed copies of the Annual Report and Accounts are being posted to shareholders who have requested hard copies. 

A Notice of Annual General Meeting ("AGM") for Mercia's 2024 AGM is included in the Annual Report and Accounts. The AGM will take place on 26 September 2024 at 10:00 am at the offices of Rothschild & Co, New Court, St Swithin's Lane, London, EC4N 8AL. All shareholders will be sent a hard copy Form of Proxy for use in connection with the AGM.

The Notice of AGM includes information for shareholders (as summarised below) regarding the Board's proposal, subject to the passing of an ordinary resolution at the AGM, for the Company to be no longer classified as an 'Investing Company' under the AIM Rules.

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About Mercia Asset Management PLC

Mercia is a proactive, specialist alternative asset manager focused on supporting regional SMEs to achieve their growth aspirations. Mercia provides capital across its four asset classes of venture, debt, private equity and proprietary capital: the Group's 'Complete Connected Capital'.

The Group has a strong UK footprint through its regional offices, university partnerships and extensive personal networks, providing it with access to high-quality deal flow.

Mercia Asset Management PLC is quoted on AIM with the EPIC "MERC".

Information on Mercia's proposed reclassification as a trading company

1.    Introduction

As announced in the Company's results for the year ended 31 March 2024, released on 2 July 2024, as part of the Company's natural evolution in strategy, the Board believes that Mercia's next phase should focus on growing its third-party funds under management ("FuM"). The Group's intention therefore is to no longer make new direct investments from its balance sheet. The Group will continue to support its existing direct investments, but anticipates that their number will reduce as these investments are realised.

In considering these proposed changes, the Board believes it is more appropriate to characterise Mercia as a trading business, whose principal business operation is one of asset management. As such, the Board is proposing that the Company ceases to be an 'Investing Company' under the AIM Rules (the "Reclassification").

The Board has today issued a Notice of AGM to shareholders, within its Annual Report and Accounts, providing details of the background to and reasons for the Reclassification and why the Board considers that their proposed new strategic direction is the right one for all stakeholders. The Board therefore unanimously recommends that shareholders vote in favour of resolution 15 in the Notice of AGM that the Company ceases to be an 'Investing Company' under the AIM Rules (the "Resolution").

2.    Background and reasons for the Reclassification

When Mercia was admitted to trading on the AIM in December 2014, it was established as a proactive, specialist asset manager focused on supporting regional small and medium-sized enterprises ("SMEs"), to achieve their growth aspirations. Mercia provided capital across the four asset classes of balance sheet, venture, private equity and debt: the Group's 'Complete Connected Capital'. Mercia provided early-stage capital from its third-party managed funds and for those young businesses showing good technical and commercial promise, the Group subsequently provided development capital from its own balance sheet to help scale up those businesses in line with its investment policy. As such, under the AIM Rules, Mercia was treated as an Investing Company. At that time, Mercia's net assets were c.£81million, considerably greater than its c.£23million of FuM.

Since its admission to AIM, the Company has grown both its balance sheet and its third-party FuM. As at 31 March 2024, Mercia had 22 direct investments fair valued at £116.9million, net assets of £189.2million and had grown its FuM significantly to c.£1.6billion. FuM now materially outweigh net assets, the largest component of which is the direct investment portfolio.

Announced on 2 July 2024, as the Board looks to the future and refreshes its three-year strategic plan, Mercia's intention is to focus much more on its profitable and fast-growing FuM. The Company intends therefore to no longer make new direct investments from its balance sheet. It will continue to support existing direct investments where merited but anticipates that their number will reduce as these investments are realised.

In considering these proposed changes, the Board believes it is now more appropriate to characterise Mercia as a trading business, whose principal business operation is one of asset management.

3.    Reclassification and future strategy

The Company is currently considered to be an Investing Company for the purposes of the AIM Rules. As a result, it may benefit from certain partial carve-outs to the AIM Rules, such as those in relation to the classification of reverse takeovers (as defined in Rule 14 of the AIM Rules). Were the Company to lose investing company status for any reason, such carve-outs would cease to apply. The AIM Rules also impose requirements on the way in which an Investing Company conducts its affairs, such as consideration of exposure to risk through cross-holdings, thereby providing in this respect a degree of inherent protection to investors in such companies. Shareholders should be aware that such requirements of the AIM Rules would no longer apply to Mercia, should the Company no longer be classified as an Investing Company.

Subject to shareholder approval at our Annual General Meeting in September 2024, the next three years sets Mercia on an evolutionary path to become a leading UK specialist alternative asset manager, focused on impactful capital deployment of third-party FuM in our target markets.

Subject to shareholder approval of the Reclassification, the Company will cease to be regarded as an Investing Company for the purpose of the AIM Rules, and it will cease to have a formal investing policy.

4.    Recommendation

As a Board, we unanimously believe that our proposed new strategic direction is the right one for all stakeholders, be they our many longstanding fund investors, our Venture Capital Trusts ("VCTs"), our employees and, critically, our shareholders. If approved by our shareholders, Mercia's twin new strategic objectives will be to increase AuM to more than £3.0billion whilst doubling EBITDA during the next three years to 31 March 2027.

As above, the Board believes that the Reclassification is in the best interests of the Company and the shareholders as a whole and unanimously recommends that shareholders vote in favour of the Resolution to be proposed at the AGM to be held on 26 September 2024 at 10:00 am.

The Directors intend to vote in favour, or procure the vote in favour, of the Resolution at the Annual General Meeting in respect of their beneficial holdings of Shares which, in aggregate, amount to 74,187,125 Ordinary Shares, representing approximately 17 per cent of the Company's issued Ordinary Share capital.

5.    Timetable

References to times are to times in London unless otherwise stated.

The above times and/or dates may be subject to change and, in the event of such change, the revised times and/or dates will be notified to Shareholders by an announcement through a Regulatory Information Service.

6.    Definitions

The following definitions apply throughout this announcement unless the context otherwise requires: