Grifols’ stock market health has not found much stability since the onset of the crisis triggered by the bearish fund report. Search for Gotham CityIn the first days of the year, the Catalan hemodiferite group was trading above the level of 15 eurosshortly before the jump into the void caused by allegations of fraudulent accounts originating in the United States. Since then, it has been difficult to chart a clear direction; especially because of the company’s volatility: every piece of good news from one Positive decision from CNMV To some modest, but positive, results, it has been met with a state of alarm in the market. Now, with a strange figure approaching 10 euros per share – about two figures that have been recovered on only a few occasions since February – it seems that the Catalan pharmaceutical company After finding the quote lever stable“Most of the recovery is in response to the potential Brookfield OPA,” comments a market analyst in conversation with Món Economia. Javier CabreraThe intention of the Canadian investment vehicle to delist the company from the stock market, at a first price in line with current values - the 10 euros that the industrial company currently touches – raises capital enough to remove the accounting and judicial weapons that could threaten it in recent weeks, from accounting corrections to a possible class action lawsuit from Los Angeles. Now, even if the founding family decides to negotiate, the professor of economics and business studies at the Open University of Catalonia Joachim It will become clear A duel at the top is expected to eventually end with an agreement on some final terms that, for now, separate the two sides. “It will be one confrontation“, the expert predicts.
There are several reasons why Brookfield is keeping an offer of around 10 euros per share. First of all, without such an operation on the table, the Catalan company’s shares would likely be worth much less than the 9.77 euros at which they closed Tuesday’s session on the Ibex-35. “If the OPA does not go ahead – for reasons of Cabrera – we will likely see a significant correction” downwards on the screens of the Madrid parque. Now, developments from Canada are becoming clearer: last Wednesday, the American portal Bloomberg Moves to raise more than 9.5 billion euros in financing for the operation were announced. At the time, the drug’s title was breathing heavily at less than 9 euros, and in just five days it had risen by 10%. The dedication of the fund, for Clara, indicates a “revaluation of the shares”; and since in the absence of an official position, the push made by the Toronto company indicates a positive outcome. However, in the current situation, the future price premium is very small, just over two cents per title, a fact that could push a large part of shareholders to back down. First, the founding family: the Grifols family owns almost a third of the pharmaceutical company through various companies – in addition, as the market analyst emphasizes, a certain loyalty from institutional and private investors willing to follow their instructions. “They have already said that they are not ready to sell, but we have to see if this is a real declaration of intent or if we are dealing with a strategy to preserve value,” explains the academic.
The readings from the market are varied, and point to the great uncertainty that still surrounds Grifols’ immediate future. On the one hand, the founding family is resisting; institutional and private shareholders who entered the Catalan company’s capital before the crisis would see the sale at €10 as a significant step back from their initial investment. On the other hand, the company’s current situation, with debts of around €9.3 billion even after the sale of 20% of Shanghai RAAS, calls for strong moves. According to Cabrera, this actually limits the possibilities: “In its current state, Grifols cannot negotiate much; if Brookfield does not clarify something, either the OPA will be done for €10 or it is not interested,” says the analyst. Clara, who is completely against it, assumes that the Canadian fund “will have to increase the insurance premiums.” Indeed, the €9.5 billion financing target suggests that financiers “expect to pay more,” although he recognizes the need for a margin to allocate part of the new capitalization to clear liabilities. Beyond the meaning of the offer, the sources consulted agree that the moves of the potential buyer indicate an advanced process.
The real value of Grifols
“Brookfield has made a strategic move: with their announcements, suspending quotes to avoid volatile movements… It’s an earthquake, they will want to sit down to negotiate,” concludes Clara. She sees “a lot of reliability” in the messages they send to the market. According to the latest information published – this is how an investor explained it on the portal Finanzas.comamong others from the management will bet on a figure closer to 15 euros, which was the value of the multinational before the Gotham crisis. Regardless of how the offer ends, the experts consulted indicate that the current valuation of the company is more in line with the value of its assets and its commercial capacity. “I would say that the real price is closer to current levels,” says the analyst, than to the metrics that have been read not only in the months leading up to 2024; but before the pandemic. It should be remembered that the equity value of the Catalan multinational reached 30 euros in February 2020, shortly before the decline caused by the Covid-19 health crisis. “In 2022, the value of the share will exceed the net asset value of the company by 40%,” estimates Clara; confirming how this year’s movements have led investors to reduce the premium that can be allocated to them.
operational improvement
Beyond market responses, both experts point out that the improvement – operational, organic and commercial – at Grifols is clear. The departure of the founding family from all its executive positions, along with the appointment of Nacho Appia as CEO and the transition of Thomas Glanzmann to non-executive chairmanship from 2025, all point to a “commitment to” in Cabrera’s view. “Transparency” which, after the accusations against the Catalan company and the accounting described by the expert as “aggressive”, allowed “restore some confidence” of investors in the “Grifols” brand and its management. On the other hand, the results of the second quarter of this year laid the foundation for resolving one of the major problems that the capital discovered in the company: the difficulty of generating cash flow, a fact that prevented the organic path from being erased from “indebtedness”. With a limited but present positive result of 36 million euros, “good news” on the balance sheet, the company sends the message that it is on the way to recovery. But the expert points out that this good performance must “continue for long periods” until all the loopholes are closed. Clara adds that the task should not be particularly complicated; since “no one has ever doubted that Grifols is profitable” and that its core business maintains good profit margins in a sector with high added value.
However, the final solution to the cash problems based on the balance sheets in the green zone implies a very long-term strategy – “maybe half a decade”, warns the professor. The second lever to be activated is the return to divestments. For Clara, the SRAAS operation represents the way: giving up part of the control of the company’s assets without selling them completely. He emphasizes that the roadmap should be implemented “very gradually, without selling them quickly”; to leave the negative gradually without raising any alarm for investment. Cabrera, for his part, is cautious about any divestment of this type, given that the company “ends up losing its capital and, in the long run, it becomes liquidated”. In addition, divestments send a message to the markets that is against the stability that Grifols achieves because going out to look for buyers confirms that “there are problems with debt repayment”. However, we will have to wait for official moves, since neither Brookfield has gone on the offensive nor Grifols is open to other strategies. However, with a stake approaching 10 euros, peace is easier.
“Infuriatingly humble social media buff. Twitter advocate. Writer. Internet nerd.”
