Grifols Says Founding Family, Brookfield Weigh Takeover Bid

(Bloomberg) — Grifols SA said that its founding family and asset manager Brookfield have made an approach to buy and delist it, after the pharmaceutical producer lost billions in market value amid a short-seller attack. The shares jumped the most in four months.

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Brookfield and the Grifols family “have reached an agreement to evaluate a possible joint takeover bid to acquire all” the shares of the company and take it private, the Barcelona-based firm said in a regulatory filing Monday. The company has a market value of €5.5 billion ($6 billion).

Grifols doesn’t know whether the transaction will take place nor the terms under which it would be carried out, it said.

Shares of Grifols rose as much as 14.5% after a suspension in trading was lifted around noon on Monday, the biggest increase since March 8.

The offer is the latest twist in a crisis that started in January, when the company came under a short-seller attack from Gotham City Research. As Grifols sought to calm investors, it removed all family members from executive positions, hired an outsider as chief executive officer and named a new chief financial officer.

Prior to the news, the stock has fallen by 36% since Gotham published its report, where it accused the company of manipulating its debt and profit figures. The plunge wiped some €3.2 billion from its market value.

Grifols has denied any wrongdoing.

“From the perspective of the family, it’s a bingo. They are saved from the headache of financial markets, they can focus on the business and that’s it,” said Xavier Brun, a portfolio manager at Trea Asset Management that has held the stock for a decade. “At the same time, for me as a shareholder that’s held onto the name despite it being a path of suffering if they were to leave us aside that would make me feel bad.”

Family members and a group of associates control about 30% of Grifols through several vehicles. Three family members and a long-term lawyer to the family sit on the 13-member board. The family ran the company for four generations, until 2023, when an outsider became chief executive officer for the first time.

Grifols’ high-yield bonds surged on the news. Notes due in October 2028 are poised for the largest daily gain since they were issued, according to data compiled by Bloomberg, rising 5.6 cents on the euro at 89.4 cents.

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The firm is loaded with debt and has for months sought to reassure investors that it can make enough cash to meet its obligations.

The possible takeover would allow the new management team to focus on operational improvements, according to Charles Pitman, an analyst at Barclays Bank Plc, who suspended his rating, price target and estimates on Monday.

“However, given the poor free cash flow track record and low confidence in prior management, we would not expect a significant premium to be offered,” Pitman said.

By acquiring Grifols, Brookfield would add to private equity’s growing interest in blood plasma products in recent years.

In 2022, Permira acquired two companies to combine them. It teamed up with Abu Dhabi Investment Authority to buy Italian family-run drugmaker Kedrion Biopharma, and also purchased the U.K.’s Bio Products Laboratory Ltd.

–With assistance from Libby Cherry and Clara Hernanz Lizarraga.

(Updates with shares in fourth paragraph, analysts comments from eighth paragraph)

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