Rarely has a depreciation like the one Grifols experienced in 2024 been seen in the history of the Ibex. It is true that the company had clear symptoms of weakness for months before, weighed down by a huge debt and a rise in the price of its main raw material, plasma, which spoiled its margins. But still, both the violent Gotham stock market attack and the derailment of the takeover bid proposed by Brookfield have had an impact that has evaporated 41.3% of the company’s value in eleven months. Both facts are based on the lack of transparency in the pharmaceutical company and the management of the founding family and its investment vehicles, which do not transmit sufficient confidence to the markets. But let’s go in parts.
1. The Gotham City Attack
It was on January 8, 2024 when Grifols’ ordeal began. The bearish firm Gotham City released a harsh report to the public that questioned the company’s financial health. Above all, he pointed out the family for deliberately distorting the accounts and hiding various operations linked to the investment vehicles of the saga, specifically with the Scranton estate. The entity led by Daniel Yu directly accused the company of distorting the ebitda, through a double consolidation of the companies Haema and Biotest, and of lying with the real debt figure at 920 million euros. The doubts created were such that the National Securities Market Commission went in ex officio to investigate the accounts of the hemoderivatives firm.
2. CNMV investigation
The first investigations by the Spanish regulator were not encouraging for Grifols. It found “relevant deficiencies” in the scales indicated precisely by Gotham, that is, debt and EBITDA, and gave the company a period of fifteen days to restate its accounts. When the pharmaceutical company applied the CNMV recommendations, the result was that the financial debt amounted to 10,527 million euros, compared to the 9,416 million reported with the previous calculation. The main differences were at €234 million due to “extraordinary, unusual or non-recurring expenses and cost savings and operational improvements for the next 12 months.” And on the other hand “the exclusion of the expense and debt corresponding to leasing (property rentals for plasma donation centers) for a total of 1,111 million euros.” This was due to an agreement with Inmunotek and this company’s centers in the United States, rented by Grifols. However, the CNMV saved Grifols by ensuring that the formula in which it presented the accounts was not incorrect, something it would clarify months later.
3. Accounts without auditor
Although the company corrected the numbers regarding the CNMV’s requests, the presentation of annual results was another fateful moment in Grifols’ recent history. The firm presented its numbers to the regulator without the support of the auditor, which caused another of the most notorious falls in the stock market. And at that time the credibility of the company was in question due to recent events.
4. The change at the top
Another consequence that the Gotham Report caused was a radical change in the Board of Directors of the Catalan pharmaceutical company. A month after its publication (although the decision was officially communicated in May), all the executive power of the Grifols family disappeared. The year began with Víctor and Raimon Grifols as Co-CEOs of the pharmaceutical company, but Daniel Yu’s accusations caused a domino effect at the top that left the entire family as spectators. “As of today, May 31, 2024, directors Víctor Grifols Deu and Raimon Grifols Roura have ceased to have the category of executive directors as they ceased to perform management functions in the Company, so as of June 1, 2024 they become have the category of proprietary directors,” read the statement sent to the CNMV. Likewise, the other member of the family on the Board of Directors, Albert Grifols Coma-Cros, also became a proprietary shareholder. With these changes, the regeneration process at the top of the pharmaceutical company was practically closed. Previously, on April 1, Nacho Abia was named the new CEO of the firm, currently the top person in charge after the loss of the executive nature of the presidency.
5. The sanctioning file
Let us at this moment allow ourselves a small time jump in the annus horribilis that Grifols has experienced before addressing the takeover chapter. The CNMV, which initially covered up Grifols, ended up opening a disciplinary file against it in September. The regulator accused the company of a possible commission of a very serious continued violation for the provision of regulated financial information with inaccurate or untruthful data in the consolidated annual financial reports for the years 2021, 2022 and 2023. The file, which would have seemed To anyone an endorsement of the Gotham Report, it was not such, since Daniel Yu also faced another very serious accusation for manipulating the market with fictitious data to make money. In fact, the Anti-Corruption Prosecutor’s Office also sued Gotham before the National Court and the judicial body admitted the complaint.
6. The appearance of Brookfield
In the midst of the chaos that was being experienced at Grifols, the Brookfield fund arrived with the intention of taking over almost 69% of the firm’s capital in an operation with the connivance of the founding family, which owns 31% but had already lost everything in July. the executive power. The Canadian entity requested the company’s books to study the details of the business and simultaneously began the search for both other investment partners and banks to be able to refinance part of the company’s debt that was due in the short term. For almost five months Brookfield was evaluating the operation, while Grifols appointed a specific committee to also advise on it.
7. The offer derails
The Canadian fund, finally, launched on November 19 a potential offer of 10.5 euros per share, a figure 22% higher than the value of the securities on the day Brookfield’s interest was known (July 8), but which It was a value lower than the price at which the stock was trading early that same day. This caused the Transactions Committee to be inclined to decline the offer, a fact that the Board of Directors assumed hours later. The company’s refusal caused the Canadian fund to decide to abandon the operation a few days later, causing another loss of almost 20% of the share value.
8. And now, what?
After Brookfield’s refusal, the company now faces the difficulty of facing a debt that matures throughout 2025. The most immediate date is next February 15, when the maturity of a senior guaranteed bond with a value nominal of 905 million and an interest of 1.625%. The second credit is made up of a revolving line of 1,000 million that matures in November of next year and of which 625.48 million have been drawn down at the moment.
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