Grifols is already preparing its next steps to reduce the company’s liabilities, the blood products firm’s main Achilles heel. In the coming months, the pharmaceutical company will carry out two of the most significant operations: it will simplify its structure and unify the shares of type A (with voting rights) and type B (without voting rights), that is, when the value recovers. titles that fell as a result of the attack on Gotham City.
The Catalan company’s chief financial officer, Alfredo Arroyo, conveyed both messages to Grifols’ core investors, although he left details of the moves in limbo. “As for the consolidation of shares A and B, this is being discussed. When prices come back, we will seriously think about it.”– he assured.
Although this did not clarify the issue of what price was appropriate to carry out this move, it is also true that a share combination had been on the minds of the directors of Grifols for several months. In fact, in March last year, when the sale of Shanghai Raas began to take shape and any capital increase was ruled out, the possibility of combining Titles A and B was already mentioned in passing.
The move was calculated by Citi a little less than a year ago, indicating that it could bring the pharmaceutical company up to 1.2 billion euros. However, the poor stock market situation the company is currently experiencing makes the operation less attractive since share B is worth only €2.24 less than share A. If these non-political shareholders were to cover the difference to get them in line with the rest , For the 261 million non-voting shares outstanding, they will have to pay about 585 million euros.. This figure would be useful for maturities in 2027, when 3.8 billion worth of loans will be repaid.
Another movement that Grifols is driving is simplifying his structure. According to Arroyo, “the company is working to simplify the structure of the company, and in the future, all the operations that will be carried out will be simple.” This implies an asset sale similar to the one carried out with Shanghai Raas, and the first thing that comes to mind for the firm’s analysts is the pharmaceutical company’s diagnostics division. The valuation of this Grifols site is approximately 2,000 million euros. The company has more assets, but they are tied to plasma, the main driver of its accounts, and it appears to be having a harder time doing without them.
Anyway, This will not be an action designed for the very short term.. The blood products company now has depreciation charges due in 2025 that exceed €2.7 billion. To achieve this, the drug company continues to place blind faith in the plan it has communicated repeatedly over the past year.
On the one hand, the 1.6 billion that the firm will receive as a result of the sale of 20% of Shanghai Raas to electronics giant Haier will be entirely dedicated to debt. In fact, the operation is so important to Grifols that they issued a statement on Sunday evening highlighting the Asian giant’s statements ensuring the purchase will go ahead.
On the other hand, Arroyo says the company has $1 billion in cash. Finally, according to the latest update from Grifols, the reduction plan announced at the end of 2022 will save 450 million euros during this year. The amount allows us to trust the plan, since the information that Gotham City relayed is categorically false.. It is worth remembering that the analyst house reduced the firm’s EBITDA and increased its debt, resulting in its leverage ratio almost doubling compared to the figure reported by the Catalan company in October last year.
Another bearish attack
In the midst of the storm that Spain’s main pharmaceutical company is experiencing, yesterday CNMV announced a new bearish attack on the company. Millennium International Management Fund announced a short position of 0.59% of capital, causing the blood products firm’s stock market to crash overnight. It fell 5.5% at midday and ended the day with a loss of 4.05%.
Millennium is already known among Grifols shareholders. According to the Spanish regulator, it entered at the beginning of September with 0.51%. In November it reached 0.6%, and yesterday the previously mentioned figure reappeared.
Relations between Grifols and CNMV will become tense in the coming days.. The regulator has launched an investigation into Gotham and expects Grifols to submit all information within 10 days, a deadline it will meet on Wednesday. The regulator wants to know what kind of relationship the pharmaceutical company maintains with its second shareholder, Scranton, who is also one of the investment vehicles of the Grifols clan.
And at the heart of the attack on Gotham City is the merger of two companies (Haema and Biotest US) both in the blood product company’s accounts and in Scranton. If the accounting strategy, as Gotham claims, is not well executed, the drug company’s debt reduction plan will suffer a serious blow. In case the figures presented in the Catalan firm’s results are correct, Grifols will emerge unscathed from the attack.
In fact, during a meeting with analysts, the company’s President and CEO Thomas Glanzmann confirmed that they would sue the analytics company for publishing a report accusing them of falsifying the accounts. The pharmaceutical company, however, failed to stop the bleeding in the stock market, although the decline is no longer as bad as last week. Yesterday, Grifols shares lost 3.8% on the Spanish selective, reaching a price of 8.64 euros per share.