“They have been three very difficult months for the company, its employees and the Grifols family,” acknowledges Thomas Glanzmann, executive president of Grifols, after taking stock of the earthquake that the company has experienced with the three attacks it has suffered from the bearish fund. Gotham City Research.
In an interview given to La Vanguardia together with the new CEO, Nacho Abia, Glanzmann highlights that the company “enters a new stage with the incorporation of the new executive, turning the page on the Gotham episode after having gotten the auditors and the CNMV to endorse the accounts, agree on the sale of its Chinese subsidiary Shanghai Raas and already have a bond issue of 1,000 million euros on track to cover short-term maturities. “Addressing our challenges will take some time,” he acknowledges, but “we have all the pieces to continue to be successful in the future.” From the bearish attack, Abia assures, they have learned lessons: “We are going to work so that there is never another Gotham report that questions what we do.”
Glanzmann points out that Grifols “entered a stage of transformation after the pandemic,” when mobility restrictions and fear of contagion sank donations of plasma, the raw material to make its products, and skyrocketed its cost. “This forced the company to make difficult decisions: restructure the network of plasma centers, simplify operations, which unfortunately also had an impact on employment. We also rethink R&D, incorporate new managers and focus on reducing debt.”
The president of the firm attributes the credit to the Grifols family for assuming that “all the pieces had to be rethought, including their participation in the management,” and in this context “they offered me to join, since I knew the business well and had a connection with Grifols of 17 years, in addition to 30 years of experience in the sector, to lead the restructuring.”
Glanzmann recalls that at the end of 2023 Grifols’ prospects had taken a turn, with the agreement to sell Shanghai Raas’s stake to Haier, the recovery of operating profit or Ebitda, which in adjusted terms had grown by 27%, while operating cash flow had increased by 300 million euros. An agreement had been reached to incorporate Nacho Abia as the new CEO, and the stock had skyrocketed on the stock market. And then, on January 9, Gotham launched the first of its three attacks against the company.
“The markets and the regulator questioned our accounts, which had always been endorsed by the auditors, and wanted to review them all, focusing on transactions that were carried out four and six years ago, and they examined our relationships and transactions with related parties, which have always been carried out under market conditions, and they questioned our governance and transparency.”
Glanzmann acknowledges that the damage to Gotham has been significant “not only in the share price, which I hope will recover soon,” but in “the reputation that the company has built in its 115 years, and that takes time,” although both the auditor and the CNMV have endorsed the company’s accounts. “We have worked very closely with our auditors and with the CNMV and we will follow all their instructions, this crisis should be behind us,” he says.
The company will introduce other changes to “continue to improve our governance” and will make the two key committees, the “audit and the compensation committee, be composed of independent directors.”
Nacho Abia considers that the crisis caused by Gotham “is an isolated episode, obviously driven by an interest group to make money in the financial market,” and that “it could not be foreseen.” But they have learned lessons from it. “It was a wake-up call,” he admits. Grifols “is a complex company, the result of its great growth” and the lesson is that “we must work to reduce that complexity and to increase the clarity of our explanations to the market, which is what allowed the Gotham report to generate these concerns. “We are going to work so that there is never another Gotham report that questions what we do.”
Glanzmann acknowledges that in the face of the Gotham attack “we felt a little alone. There are people who have given us their support in private, and it would have been great if they had also done so in public,” he acknowledges. However, what hurt them the most, Abia points out, “is the lack of knowledge of the public, and of many investors, of what Grifols is, of the success story for Spain and Catalonia that this company is and of the contribution it is making. to thousands of patients, not only here but around the world.”
Gotham chose Grifols as a target “because they attack European companies with a lot of debt,” Glanzmann acknowledges, with or without reasons. “Short selling is perfectly legitimate. What is not correct is manipulating the market with a report that does not reflect reality, like the one they did.” In his opinion, his case has raised awareness, in Spain and the United States, “of how market manipulation, a report, can put a company like ours at risk when it should not be.” He also believes that the debate on the legal framework has been opened. “Financial groups act according to the laws and regulations of each place, and if they can do that, they do it,” Abia emphasizes.
Grifols’ debt, of more than 9,000 million euros, has been the cause of its vulnerability. The firm, explains Glanzmann, assumed “strategic leverage”, which although “in the short term presents challenges for us”, has allowed them to “purchase businesses that are fundamental for the future of Grifols”. A company “always calculates the risks. But, evidently, no one could foresee that we would have a pandemic or that the interest rate environment would change so drastically and for so long,” he assures.
As an example, the purchase of Biotest: a company “in transition”, which for the moment hinders the group’s profitability until it brings its new drugs to the market, starting in 2026. “This illustrates how capital intensive this business is. You have to make investments years before the return arrives. The decision has to be made at the right time, because if you don’t miss a train that can be very important for the future,” explains Abia.
The CEO recalls that the plasma industry, in which Grifols is the third group in the world, is very competitive. “Size matters and Grifols did the right thing in taking advantage of all the opportunities for growth and consolidation in the market. Covid certainly didn’t catch us at the best time. But other companies that did not take advantage of the opportunities to grow are now very small players and have no chance of reaching the scale that Grifols already has.”
The company already began to reduce its debt ratio last year, explains Glanzmann, and this year it will do so additionally with the sale of its stake in Shanghai Raas. Meanwhile, it is finalizing a private placement of guaranteed bonds of 1,000 million euros, to refinance an issue of unsecured bonds that matures in 2025. “We hope to be able to announce the closing in one or two weeks,” says Glanzmann. “The number of institutional investors that have contacted us to participate has been extraordinary and says a lot about the market’s confidence in the future of the company, in our growth and our ability to repay the debt,” Abia emphasizes.
The CEO adds that sales have already fully recovered and are growing strongly, while the operational restructuring has increased the company’s profitability and will continue to improve it. “The main focus now is on the generation of cash flow, the last element of that recovery, and on offering a clear image to the market on how we are going to face the payments that we have pending and regain the full trust of everyone. the world”.
The cash flow will be directed to reducing debt and undertaking investments that drive the group’s growth. Among the pending tasks, they acknowledge, is also the repurchase of the stakes in BPC and Haema, which are now owned by Scranton, an investment company linked to the founding family. “We have an option, very generous for Grifols, to buy these companies and we will exercise it. But without rush. We feel comfortable with those assets because they are absolutely under our control, and we manage them. When our balance sheet allows it, compared to the rest of our priorities, we will undoubtedly buy them back,” explains Abia.
The separation between the company and the family that owns it, however, will not mean a change of brand, a possibility that the group completely rules out. “Grifols is a phenomenal brand, well recognized everywhere. We are very proud of the name and what it means, providing life-saving products for patients around the world. There are absolutely no reasons to change it,” emphasizes the company’s CEO.
