The shares of the Grifols group reacted this morning with a rise of more than 7%, to the company’s announcement that confirmed on Sunday the agreement to sell 20% of its Chinese subsidiary Shanghai RAAS to the Haier group for 1.6 billion euros. In a very volatile session, as were all of last week’s publication after being accused by the vulture fund Gotham City Research of falsifying its accounts, the shares once again exceeded the level of 9.5 euros to drop again, up to 8.5 euros (2%) at mid-morning.
Doubts about the possibility of this sale being truncated, crucial for its strategy to reduce its debt, caused a collapse of 11.7% of the stock on Friday on Wall Street, where it is listed through American Depositary Receipts or ADRs in the Nasdaq, so that the price broke the lows of Tuesday, the first day of the crisis and closed at $7.03. In Spain, due to the time difference, the minimum price on Tuesday was 8.01 euros, 16% below current levels. Today Wall Street is a holiday, and therefore it will not be possible to know the reaction of American investors to the group’s communication.
In a note sent on Sunday to the National Securities Market Commission (CNMV), the company explains that, “given the concern raised in the markets” about how the recent Gotham City Research report may affect the sale of 20% of Shanghai RAAS, the buyer, Haier Group Corporation, has expressed its willingness to continue with the transaction. The statement indicates that Haier’s vice president assured Grifols that the buyer “continues working to close the agreement as originally planned.”
The agreement, Grifols’ statement recalled, is “binding”, so that “both parties are contractually obliged to comply with their obligations” as long as the stipulated conditions are met, including the approval of the regulatory authorities.
“If the closing conditions are met and one of the parties refuses to close the transaction, this would constitute a material breach of the agreement” and would imply “the corresponding legal claims.” There is almost no penalty clause if the agreement is breached, as is customary in the Chinese market. The company expects to close this operation during the first half of this year, according to the calendar already published.
The agreement with Haier provides for the sale of 20% of the shares it owns in Shanghai RAAS, while Grifols will retain a 6.58% stake and a member on the board of directors in the Chinese group. In this way, the current strategic, technological and commercial collaboration agreements between the two companies will be maintained.
Grifols’ high debt is now the company’s Achilles heel: it reached 9,540 million euros in the third quarter of last year, which is equivalent to 6.7 times the gross operating profit or ebitda (ebitda). The Gotham City Research report questioned these figures, and raised it to 12 or 14 times ebitda. To do this, it charged the company with the debt of Scranton, an investment holding company in which the Grifols family participates and which has 8.4% of the company’s shares, while reducing the EBITDA by eliminating that contributed by two companies. of which Scranton is shareholders (BPC and Haema) and its American diagnostic subsidiary GDS, of which Shanghai Raas herself is a shareholder.
