TIDMCHRY
RNS Number : 1182U
Chrysalis Investments Limited
01 December 2021
The information contained in this announcement is restricted and
is not for publication, release or distribution in the United
States of America, any member state of the European Economic Area
(other than to professional investors in Belgium, Denmark, the
Republic of Ireland, Luxembourg, the Netherlands, Norway and
Sweden), Canada, Australia, Japan or the Republic of South
Africa.
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
the Market Abuse Regulation (EU) No. 596/2014 as amended by The
Market Abuse (Amendment) (EU Exit) Regulations 2019.
This announcement is an advertisement and does not constitute a
prospectus and investors must only subscribe for or purchase any
shares referred to in this announcement on the basis of information
contained in the prospectus dated 10 March 2021 (the "Prospectus")
published by Chrysalis Investments Limited (the "Company") and not
in reliance on this announcement. This announcement does not
constitute and may not be construed as, an offer to sell or an
invitation to purchase, investments of any description, or a
recommendation regarding the issue or the provision of investment
advice by any party. No information set out in this announcement or
referred to in other written or oral form is intended to form the
basis of any contract of sale, investment decision or any decision
to purchase shares in the Company.
1 December 2021
Chrysalis Investments Limited
("Chrysalis" or the "Company")
Proposed Placing
The Company today announces its intention to raise new capital
under the Company's placing programme, as detailed in the Company's
Prospectus dated 10 March 2021, through a placing (the ("Placing")
of Ordinary Shares at a price of 238 pence (the "Issue Price"). The
Issue Price represents a 1.7 per cent. premium to the pro forma Net
Asset Value per Ordinary Share of the Company as at 30 November
2021 of 234 pence (the "NAV")*.
In conjunction with the Placing, there will be an offer made by
the Company on the PrimaryBid platform of additional Ordinary
Shares at the Issue Price (the "Retail Offer") to provide retail
investors with an opportunity to participate in the equity
fundraising alongside institutional investors. A separate
announcement will be made shortly regarding the Retail Offer and
its terms. For the avoidance of doubt, the Retail Offer is not part
of the Placing.
*The proforma Net Asset Value per Ordinary Share: (1) has been
calculated using valuations of unlisted investments as at 30
September 2021 (as adjusted for foreign exchange movements to 30
November 2021), (2) has been calculated using the mid-market
closing prices of listed investments as at 30 November 2021, and
(3) includes transactions concluded in the portfolio between 30
September 2021 and 30 November 2021 at cost and therefore uses the
Company's cash balance as at 30 November 2021.
Background and rationale for the Placing
Since raising GBP300 million in March 2021, the late-stage
private market has exhibited strong growth and Chrysalis has
continued to experience significant interest in its crossover
proposition. At the time of the fundraise, the Investment Adviser
outlined a strong pipeline of new investment and follow-on
opportunities and set an expectation of adding one to three new
units per annum.
Over the summer, origination into the Investment Adviser's new
investment pipeline was considerably stronger than predicted, such
that it has added five new investments to the portfolio since March
2021, significantly outperforming its earlier expectations. While
certain follow-ons were undertaken (e.g. Starling, wefox and THG),
given the quality of the new investment cases, the Investment
Adviser chose to prioritise this channel over the period.
Use of proceeds
The expected use of new funds is primarily to drive the
performance of existing assets in current portfolio companies via
certain follow-on investments. In addition, the current effective
number of investments is at the bottom end of the Investment
Adviser's target range of 15 to 20, offering the opportunity to
selectively add new holdings.
Follow-on opportunities: the "Power of Primary Capital"
The Investment Adviser typically sees a strong correlation
between its supply of follow-on capital and the subsequent
performance of the investee asset. This ability and willingness of
Chrysalis to back its assets is one of its attractions to potential
investee companies and demonstrates the Investment Adviser's belief
in the "Power of Primary Capital". For example, considerable
amounts of follow-on capital have been devoted to developing both
Starling and wefox over the last two years (approximately GBP69
million and EUR60 million respectively). The revenue performance of
both these businesses have been impressive, demonstrating high
CAGRs (c.180% and c.160% respectively since initial investment) as
fresh capital has allowed them to materially expand and develop
their offerings. For Starling, this involved capital to back an
entry into the UK lending market in early 2020, and for wefox this
capital has allowed it to undertake accretive M&A and continue
to fund high growth over the course of 2020.
The growth displayed by these two assets last year drove
significant investor interest and was fundamental to the success of
the substantial funding rounds they both undertook in 2021, and
underpinned the material increase in valuations the companies
achieved.
Revenue growth helps drive valuations in two key ways:
-- driving the fundamental financial metrics, such as sales and
profit, that valuation multiples are often applied to; and
-- developing more valuable revenue streams and/or opening up
new market opportunities, both of which can drive valuation
upside.
An example of the latter would be Klarna. While valuation
multiples have risen since first investment, from levels the
Investment Adviser considered to be undervalued initially, the
Investment Adviser believes this reflects the market's optimism
over progress in the US, where the offering was accelerated via the
addition of primary capital in 2019 and 2020.
The Investment Adviser believes there is considerable potential
to invest selectively in the portfolio to enhance the growth
prospects for a number of its investee companies, which it believes
will generate value for shareholders by either enhancing the
eventual return, and/or accelerating that return. To that end, it
has identified two near-term opportunities where follow-on capital
may be deployed, with a number of further opportunities, most
likely in early 2022.
Selective new investments
While undertaking follow-ons is likely to be the key focus, the
Investment Adviser still believes there is room to selectively add
to the number of portfolio holdings.
Previously, the Investment Adviser has articulated a vision of a
portfolio of 15 to 20 holdings to give shareholders a sense of what
it believes to be an appropriate portfolio composition. Currently
the Company has 17 assets, but this includes Embark - where a sale
has been agreed to Lloyds Bank, subject to regulatory clearance -
and Growth Street - where the company is in the final stages of
liquidation.
Excluding these two assets means the portfolio consists of 15
effective assets, at the bottom end of the Investment Adviser's
indicated range.
Expanding the portfolio brings diversification benefits to
shareholders, not only just in terms of number of units, but also
because it allows the Investment Adviser to invest in a wide
spectrum of assets at slightly different stages of maturity. The
Investment Adviser believes this latter point is important as it
builds diversity into the likely exit dates of the portfolio to
give the best possible chance of smoothing likely capital returns
for reinvestment.
The track record of investing in new assets has been strong.
"Cohort 2" assets - those funded by raises undertaken post
investment of the Company's IPO proceeds, but prior to those made
following the March 2021 raise - show very strong performance. This
group of assets, which consists of Klarna, wefox, Embark, You &
Mr Jones, Featurespace and Sorted, has generated a gross IRR of
well over 100%. The Investment Adviser believes this clearly shows
that diversifying the portfolio via new capital has been value
accretive to existing and new shareholders.
Market outlook
Growth in the late-stage, private market has been substantial in
the year to date. As of September 2021, the total capital committed
in this sector of the market in Northern and Western Europe - the
Company's current focus - was over double that invested over 2020
at c.GBP38 billion. Within the market, a major crossover player was
present in c.15% of deals by number, versus just c.7% in 2019,
demonstrating the attractiveness of this type of capital to
investee companies. The bulk of these investors are of US origin,
showing the gap in Europe that Chrysalis is aiming to fill.
With an established and well regarded platform, the Investment
Adviser believes the Company is in an enviable position to exploit
this growing market opportunity and that these dynamics are very
supportive of its desire to continue to develop the Chrysalis
proposition and capture this potential late-stage, private
valuation accretion to the benefit of its shareholders.
Pipeline and capital raise
Given the opportunity set available to the Investment Adviser,
it believes a capital raise of GBP125 million would give it the
funding required to execute the majority of the likely follow-on
opportunities available to the Company into early-2022. Considering
the total pipeline, including some of the larger new investment
opportunities, the Investment Adviser believes the Company could
readily invest up to GBP175 million of fresh capital, with the aim
of both accelerating growth in the portfolio, and to selectively
add new investments. Historically, the Investment Adviser has been
able to deploy funding efficiently, and expects this raise to be
committed in a timely manner.
Expected Timetable for the Placing
Event Date
Placing opens 1 December 2021
------------------------------
Latest time and date for commitments 1.00 p.m. on 10 December 2021
under the Placing
------------------------------
Trade date 13 December 2021
------------------------------
Admission 8.00 a.m. on 15 December 2021
------------------------------
Crediting of CREST stock accounts 15 December 2021
in respect of the Ordinary
Shares
------------------------------
Each of the times and dates set out below and mentioned
elsewhere in this document may be adjusted by the Company, in which
event details of the new times and dates will be announced via a
Regulatory Information Service. References to a time of day are to
London time.
Liberum Capital Limited and Numis Securities Limited are acting
as Joint Bookrunners in respect of the Placing.
Capitalised terms shall have the meanings attributed to them in
the Prospectus unless otherwise defined in this announcement.
For further information please contact:
Maitland Administration (Guernsey)
Limited
Elaine Smeja +44 (0) 1481 749364
Jupiter Asset Management
Magnus Spence +44 (0) 20 3817 1325
Liberum Capital Limited
Chris Clarke / Darren Vickers /
Owen Matthews
Numis Securities Limited +44 (0) 20 3100 2000
Nathan Brown / Matt Goss +44 (0) 20 7260 1000
IMPORTANT INFORMATION
This announcement which has been prepared by, and is the sole
responsibility of, the Directors of the Company has been approved
for the purposes of section 21 of the Financial Services and
Markets Act 2000 ("FSMA") by Jupiter Investment Management Limited
(the "Investment Manager"), which is authorised and regulated by
the Financial Conduct Authority.
This announcement is an advertisement and does not constitute a
prospectus relating to the Company and does not constitute, or form
part of, any offer or invitation to sell or issue, or any
solicitation of any offer to subscribe for, any shares in the
Company in any jurisdiction nor shall it, or any part of it, or the
fact of its distribution, form the basis of, or be relied on in
connection with or act as any inducement to enter into, any
contract therefor. Copies of the prospectus are available from the
website (www.chrysalisinvestments.co.uk) and the Company's
registered office
Recipients of this announcement who are considering acquiring
Ordinary Shares are reminded that any such acquisition must be made
only on the basis of the information contained in the prospectus
which may be different from the information contained in this
announcement. The Subscription for Ordinary Shares is subject to
specific legal or regulatory restrictions in certain jurisdictions.
Persons distributing this announcement must satisfy themselves that
it is lawful to do so. The Company assumes no responsibility in the
event that there is a violation by any person of such
restrictions.
The Ordinary Shares have not been, and will not be, registered
under the US Securities Act of 1933, as amended (the "Securities
Act"), or under the securities laws or with any securities
regulatory authority of any state or other jurisdiction of the
United States. Accordingly, the Ordinary Shares may not be offered
or sold within the United States or to, or for the account or
benefit of US persons (as defined in Regulation S under the
Securities Act ("Regulation S")), except pursuant to an exemption
from or in a transaction not subject to, the registration
requirements of the Securities Act. The Ordinary Shares are being
offered and sold (i) outside the United States to non-US-persons in
reliance on Regulation S and (ii) within the United States only to
persons reasonably believed to be qualified institutional buyers
("QIBs"), as defined in Rule 144A under the Securities Act, that
are also qualified purchasers ("QPs"), as defined in Section
2(a)(51) of the US Investment Company Act of 1940, as amended (the
"Investment Company Act") and who deliver to the Company and
Liberum or Numis Securities (as applicable) a signed Investor
Representation Letter. The Company has not been, and will not be,
registered under the Investment Company Act, and investors will not
be entitled to the benefit of that Act. No offer, purchase, sale or
transfer of the Shares may be made except under circumstances which
will not result in the Company being required to register as an
investment company under the Investment Company Act.
Neither this announcement nor any copy of it may be: (i) taken
or transmitted into or distributed in any member state of the
European Economic Area (other than to professional investors in
Belgium, Denmark, the Republic of Ireland, Luxembourg, the
Netherlands, Norway and Sweden), Canada, Australia, Japan or the
Republic of South Africa or to any resident thereof, or (ii) taken
or transmitted into or distributed in Japan or to any resident
thereof. Any failure to comply with these restrictions may
constitute a violation of the securities laws or the laws of any
such jurisdiction. The distribution of this announcement in other
jurisdictions may be restricted by law and the persons into whose
possession this document comes should inform themselves about, and
observe, any such restrictions.
Each of Liberum and Numis Securities which are authorised and
regulated by the Financial Conduct Authority in the United Kingdom,
is acting only for the Company in connection with the matters
described in this announcement and is not acting for or advising
any other person, or treating any other person as its client, in
relation thereto and will not be responsible for providing the
regulatory protection afforded to clients of Liberum or Numis
Securities (as applicable) or advice to any other person in
relation to the matters contained herein. Neither Liberum, Numis
Securities nor any of their respective directors, officers,
employees, advisers or agents accepts any responsibility or
liability whatsoever for this announcement, its contents or
otherwise in connection with it or any other information relating
to the Company, whether written, oral or in a visual or electronic
format.
This announcement includes statements that are, or may be deemed
to be, "forward-looking statements". These forward-looking
statements can be identified by the use of forward-looking
terminology, including the terms "believes", "estimates",
"anticipates", "expects", "intends", "may", "will", or "should" or,
in each case, their negative or other variations or comparable
terminology. These forward-looking statements relate to matters
that are not historical facts regarding the Company's investment
strategy, financing strategies, investment performance, results of
operations, financial condition, prospects and dividend policies of
the Company and the instruments in which it will invest. By their
nature, forward-looking statements involve risks and uncertainties
because they relate to events and depend on circumstances that may
or may not occur in the future. Forward-looking statements are not
guarantees of future performance. There are a number of factors
that could cause actual results and developments to differ
materially from those expressed or implied by these forward-looking
statements. These factors include, but are not limited to, changes
in general market conditions, legislative or regulatory changes,
changes in taxation regimes or development planning regimes, the
Company's ability to invest its cash in suitable investments on a
timely basis and the availability and cost of capital for future
investments.
The Company expressly disclaims any obligation or undertaking to
update or revise any forward-looking statements contained herein to
reflect actual results or any change in the assumptions, conditions
or circumstances on which any such statements are based unless
required to do so by FSMA, the Listing Rules, the Prospectus
Regulation Rules made under Part VI of the FSMA or the Financial
Conduct Authority or other applicable laws, regulations or
rules.
Information to Distributors
Solely for the purposes of the product governance requirements
of Chapter 3 of the FCA Handbook Product Intervention and Product
Governance Sourcebook (the "UK MiFIR Product Governance
Requirements") and/or (where applicable to EEA investors and EEA
firms) the product governance requirements contained within: (a) EU
Directive 2014/65/EU on markets in financial instruments, as
amended ("Directive 2014/65/EU"); (b) Articles 9 and 10 of
Commission Delegated Directive (EU) 2017/593 supplementing
Directive 2014/65/EU; and (c) local implementing measures
(together, the "MiFID II Product Governance Requirements"), and
disclaiming all and any liability, whether arising in tort,
contract or otherwise, which any manufacturer (for the purposes of
the UK MiFIR Product Governance Requirements or MiFID II Product
Governance Requirements, as applicable) may otherwise have with
respect thereto, the shares the subject of the Placing have been
subject to a product approval process, which has determined that
such shares are: (i) compatible with an end target market of retail
investors and investors who meet the criteria of professional
clients and eligible counterparties, each as respectively defined
in paragraphs 3.5 and 3.6 of the FCA Handbook Conduct of Business
Sourcebook or the MiFID II Product Governance Requirements, as
applicable; and (ii) eligible for distribution through all
permitted distribution channels (the "Target Market
Assessment").
Notwithstanding the Target Market Assessment, Distributors
should note that: (i) the price of the shares may decline and
investors could lose all or part of their investment; (ii) the
Shares offer no guaranteed income and no capital protection; and
(iii) an investment in the shares is compatible only with investors
who do not need a guaranteed income or capital protection, who
(either alone or in conjunction with an appropriate financial or
other adviser) are capable of evaluating the merits and risks of
such an investment and who have sufficient resources to be able to
bear any losses that may result therefrom. The Target Market
Assessment is without prejudice to the requirements of any
contractual, legal or regulatory selling restrictions in relation
to the Placing.
For the avoidance of doubt, the Target Market Assessment does
not constitute: (a) an assessment of suitability or appropriateness
for the purposes of Chapters 9A or 10A respectively of the FCA
Handbook Conduct of Business Sourcebook or the MiFID II Product
Governance Requirements, as applicable; or (b) a recommendation to
any investor or group of investors to invest in, or purchase, or
take any other action whatsoever with respect to the shares.
UK PRIIPs Regulation
In accordance with the UK version of Regulation (EU) No.
1286/2014 on key information documents for packaged retail and
insurance-based investment products, which is part of UK law by
virtue of the European Union (Withdrawal) Act 2018, as amended (the
"UK PRIIPs Regulation"), a key information document (the "KID") in
respect of an investment in the Ordinary Shares has been prepared
by the Company and is available to investors at
www.chrysalisinvestments.co.uk.
If you are distributing Ordinary Shares, it is your
responsibility to ensure that the KID is provided to any clients
that are "retail clients".
The Company is the only manufacturer of the Ordinary Shares for
the purposes of the UK PRIIPs Regulation and none of Liberum, Numis
Securities or Jupiter Investment Management Limited are
manufacturers for these purposes. None of Liberum, Numis Securities
or Jupiter Investment Management Limited makes any representations,
express or implied, or accepts any responsibility whatsoever for
the contents of the KID prepared by the Company nor accepts any
responsibility to update the contents of the KID in accordance with
the UK PRIIPs Regulation, to undertake any review processes in
relation thereto or to provide the KID to future distributors of
Ordinary Shares. Each of Liberum, Numis or Jupiter Investment
Management Limited and their respective affiliates accordingly
disclaim all and any liability whether arising in tort or contract
or otherwise which it or they might have in respect of the key
information documents prepared by the Company. Investors should
note that the procedure for calculating the risks, costs and
potential returns in the KID are prescribed by laws. The figures in
the KID may not reflect actual returns for the Company and
anticipated performance returns cannot be guaranteed.
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END
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