What is the target share price for the no takeover proposal?
A bid by Brookfield and family to block the Grifols takeover is gaining momentum after it emerged the Canadian fund is seeking up to 10 billion euros from its banks to refinance the blood products maker’s debt and get the operation off the ground.
As Finance.com explains, the narrowing of the listing premium between Grifols’ Class A and Class B shares means the market is backing the takeover bid, but the big unknown is the price Brookfield and family will agree to take Grifols off the floor.
After a dismal year the company endured due to attacks by Gotham City Research and “related deficiencies” found in its report by the National Securities Market Commission, the listed company is the worst valued company on the IBEX 35 along with Solaria, with a 38 percent plunge.
Given this decline, the no-takeover proposal represents a possible exit for shareholders, according to Kepler analysts. It remains to be seen at what price Grifols shareholders would be willing to approve the deal.
Grifols still has high potential
The first hurdle for Brookfield and his family is to reach an understanding. As analysts at Banco Sabadell commented on Thursday, the fund will count on a level of 10 euros per share. However, the family is thinking about 12-13 euros.
However, despite the financial challenges facing Grifols, the accounting issues with its investees and the worrying cash flow outlook, there is no doubt that the fundamentals of the business are solid.
Recent results just presented by the CSL group, Grifols’ main competitor, showed an increase in plasma production capacity and improved operational efficiency.
These figures confirm the growth potential of Grifols’ business, as Barclays analysts explain.
In fact, despite all the information about the no-takeover proposal, analyst consensus continues to peg Grifols’ target price at €16.94, implying a recovery potential of almost 80 percent at current market prices.
Price of takeover bid under dispute at Grifols
For this reason, accepting the first price Brookfield and his family put on the table may not be the best decision.
“The minimum price I would accept is 15 euros per share, which is the price Grifols was trading at before the Gotham attacks,” an experienced manager told Finanzas.com on condition of anonymity.
Moreover, if the takeover price was between 12 and 13 euros, “for everyone who joined in January, it would be fine, but for those who have been with the company for many years, it’s a joke,” the sources interviewed noted.
However, the sources interviewed do not rule out that the takeover bid could be implemented even at a price of 12 euros, since the reality is that “many people are trapped in Grifols”.
The problem is that selling at €12 may be a relief, but it is by no means the most effective solution. “Minorities may feel that those who ran the business are the owners of the company, who are also the ones who created the problem,” recall the sources consulted.
Without a takeover bid, everything will be in the hands of Grifols shareholders. Delisting could ease the pressure on the company and make it easier to refinance its debt, but Brookfield will have to assess the situation well to offer a sufficiently attractive premium.
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