Was Grifols within reach of a takeover bid after the attack on Gotham?

In a report published last week Gotham City Exploration led to a drop in the stock market value of the Spanish pharmaceutical company Grifols. more than 3000 million euroslocated around 5.5 billion. These are the levels of valuesa proportion that the group has already experienced in 2022, when market concerns about the impact of rising interest rates on the debtor firm caused a sharp stock market correction.

At that time, several venture capital funds approached Grifols with a proposal for possible participation in the stake or evenoffer for public acquisition (takeover offer) this allowed the stock market to be eliminated, while the family in the capital retained its influence. CVC, Cinven or EQT There have been some investment entities that, without going beyond the scope of approach or exploratory research, have tested a possible transaction that would allow them to take a significant position in the blood plasma derivatives maker in exchange for strengthening their balance sheet.

With the price back at these levels, some analysts are wondering if it is possible that this type of investor return to the company due to the fall in stock prices caused by the onset of Gotham City exploration.

Affordable but uncertain price

However, financial and market sources believe that it is too early to think that a major investor will bet on Grifols, although yesterday analysts Berenberg They talked about the opportunity that now exists to build a significant position in the company. at an affordable price.

There are two reasons that might put investors off right now. Firstly, there is high uncertainty regarding the potential emergence of new surprises in shareholder, financial and commercial relations between Grifols and Scranton Enterprises – a company associated with the family that owns the group – which is the center of criticism of the group from Gotham.

Although the market has already largely ignored this risk and the blow to the company’s reputation with stock market drop of almost 40% As of last week, an investor who would like to gain control or at least have significant influence in a company will want to make sure that there are no other “corpses” in the closet and that communications with the family be as transparent as possible before making significant investments.

The focus of the bear campaign is the contract between Grifols and the plasma collectors. GPC and Hemewho belong to a family society Scranton. The pharmaceutical company has the opportunity to buy out these companies, but for now the connection depends on 30-year plasma supply agreementwhich the suppliers themselves may violate in the event of a “change of control.”

The second factor complicating the company’s work is Grifols’ high debt. In a takeover scenario, for control, a potential buyer, in addition to payment 6000 million for shares (one third less if the family remains in the capital), must take on more 10 billion financial obligations with private banks, bondholders, the European Investment Bank (EIB) and the GIC.

Financing contracts include change of control provisions (or “poison pills”) that require the new owner to repay loans and repurchase securities once he takes control of the company. In the main loan to Grifols (4,300 million euros with a group of companies that includes Bank of America, BBVA and JPMorgan, HSBC among other things) the buyer does not even have to take most of the capital. All you have to do is buy 35% pharmaceuticalor update the composition of the board of directors compared to what existed in 2019 (when the loan was signed) to activate a clause requiring immediate repayment of the money.

Increased financial costs

In the current environment of high interest rates and a virtually closed acquisition finance market, it would be very difficult to structure a deal worth more than 16 billion euros The company was also touched upon from an image point of view.

And if you do, cost of debt That would be much more than what Grifols currently enjoys in its loans and bonds, many of which were signed during years of cheap money.

There may be other alternatives, such as taking minority shareaccording to the Grifols family and without application of debt repayment provisions. But this potential agreement comes back to the first factor mentioned, namely the need to clarify the scope of the allegations brought by Gotham.

The market is considering two factors that could help funds start taking Grifols seriously. From the management side, National Securities Market Commission (CNMV) This week, get Grifols’ answers to your questions about his relationship with Scranton. If the manager dispels your doubts and closes the investigationinvestors could rely more confidently on the company’s “soft landing” after the turbulence caused short seller.

Chinese injection

The second positive news will be the closure sale of 20% of the Chinese company Shaghai Raas to the Haier group. This transaction will include the introduction 1.6 billion euros which would allow the group to reduce its senior debt, that is, the EIB, and return some of its bond issues.

In an optimistic scenario, CNMV approval and debt reduction, Grifols could attract suitors.

IN negative scenarioimplying that the scandal will continue with regulatory complications and delays to the agreement in China, the Catalan group may instead be forced to reach an agreement on refinancing or restructuring your debt. In 2025, the bonds for 1.850 million and the credit line for 900 million will mature.

“Poison pills” in debt and a contract for plasma

Grifols main financing agreement with the bank, 4.3 billion eurosdetermines that in the event of a “change of control” of a Spanish pharmaceutical company, The next day Thanks to this modification, the company will have to repay all debts to creditors, leaving its liabilities at zero.

Change of control is defined as the moment when a person or group achieves acquire more than 35% of Grifols capitalor gain the right to appoint a majority of board members. Excluded from this point is the Grifols family itself, which through several companies owns just over 30% of the company, which can reach up to 49.9% shares without activating the repayment clause of the loan, the main maturity of which is in 2027 and in 2025 for the revolving facility of EUR 900 million.

A change of control is also considered to occur when a majority of the board of directors ceases to consist of members present in this body in 2019when the financing agreement was signed; or when Grifols ceases to have full control over its Irish and US subsidiaries as borrowers under the loan.

Grifols bond issues also contain “poison pills” (anti-takeover clauses) that force repurchases in the event of a change of control.

Plasma purchase and sale agreement BPC and Haema for 30 years It also includes guarantees in case of such a scenario.