SPAIN – Shares of Spanish pharmaceutical company Grifols dropped by over 13% on Wednesday following the news that Canadian investment firm Brookfield has walked away from its plans to acquire the human plasma-based drug maker.
The abrupt cancellation of the proposed deal, which had been under negotiation for several months, stemmed from disagreements over the company’s valuation, Reuters reported.
Brookfield’s non-binding offer, made on November 19, valued Grifols at €6.45 billion (US $6.8 billion).
However, after failing to agree on pricing terms with the company, Brookfield decided to end the talks.
A spokesperson for the Grifols family, which controls a third of the company, indicated that they believe Grifols is worth much more than Brookfield’s bid and reiterated their intention to continue growing the company independently.
Brookfield had initially expressed interest in partnering with the Grifols family to take the company private, contingent on a successful due diligence process.
However, despite having secured financing and formulating a turnaround plan for Grifols, the two sides could not reach an agreement on the deal’s valuation.
The announcement of Brookfield’s decision sent Grifols’ shares into a sharp decline, marking its largest single-day drop since February 29.
In addition, Grifols’ bonds maturing in October 2028 recorded a significant drop in value, falling to around 89 cents.
“The family will not back another take-private transaction,” a representative for the Grifols family said, adding that shareholders had voiced concerns that the company was being undervalued.
The decision to abandon the takeover comes at a challenging time for Grifols, which has faced significant headwinds this year.
The company’s market value has plunged by over a third since January, following a controversial report from short-seller Gotham City Research.
The report raised concerns over Grifols’ governance and accounting practices, further eroding investor confidence.
The company has vehemently rejected Gotham’s accusations, filing a lawsuit in a New York court.
In response to the short-seller’s report, Grifols introduced management changes, appointing a new CEO, Nacho Abia, and a new CFO, Rahul Srinivasan, as part of a broader effort to rebuild trust with investors.
The company also made moves to reduce the executive powers of Chairman Thomas Glanzmann, further separating the board from day-to-day operations.
A major player in the blood-plasma industry, Grifols has faced operational difficulties in the wake of the COVID-19 pandemic, including a decline in blood donations and the heavy burden of debt from a series of acquisitions.
As of the third quarter, Grifols’ total debt, including leases, stood at €9.2 billion (US $9.7 billion).
Although the company has made strides to improve its leverage, its financial outlook remains uncertain.
In particular, Grifols issued a disappointing forecast of just €5 million (US $5.3 million) in free cash flow for 2024, citing extraordinary items and surprising analysts with the figure.
