Scranton, an unknown investment company under Dutch law, has become the Achilles heel of the Grifols group in recent days, following the report of the vulture fund Gotham City Research that accused it of falsifying the accounts and assured that there are irregular operations between the two firms. Scranton, controlled in 20% by the brothers Víctor, Raimon and Albert Grifols Roura, has 22 investors and controls 7.49% of the capital of the pharmaceutical company.
“We were born to help Grifols where the company did not reach”, says one of its shareholders, who asked not to be identified. Thus, Scranton has “accompanyed” the pharmaceutical company in several transactions, buying part of the assets or in sale operations
Scranton was born in 1999, when the US company Alpha Therapeutics, which had 50% of the capital of Grifols, decided to sell this share. To avoid the sale, the Spanish partners had to buy the shares in the hands of Alpha. So the Grifols brothers and twenty managers, relatives and friends, such as Tomàs Dagà, founder of the Osborne Clarke firm, partnered with the William Blair investment bank and created Scranton. With very little capital (600,000 euros) they bought 16% of the shares, with debt guaranteed by the same securities, while MGPE, a Deutsche Bank manager, bought the other 34% controlled by Alpha. Spanish investors later bought William Blair’s stake, while Deutsche Bank sold its shares in the 2006 IPO, leaving the family, and the Scranton investors, as the sole permanent shareholders of the group, with control of nearly 30% of the capital and 40% of the voting rights.
Grifols also turned to Scranton to finance the purchase of Talecris, an American company for which it paid 2.8 billion euros in 2011. Thus, it sold to this investment holding the office buildings, warehouses and the factory in Clayton (United States) in a sale operation
Scranton was again key in 2018, when two of the few independent companies that operate plasma collection centers in Europe and the United States went up for sale, and Grifols decided to buy them despite having to refinance with the bank 5.3 billion euros of debt, to become a world leader in donation centers.
Thus, Grifols bought three companies owning 59 centers: BPC (Biotest) and Haema Alemania and Hungary, for 469 million euros, and months later sold them to Scranton for the same price and paid him an irrevocable purchase option for buy them back for the same price at any time and manage them for 30 years. He also gave Scranton a “seller’s loan”, which today amounts to 98 million euros, at the request of Bank of America, the entity that lent Scranton the funds it needed to buy those companies.
Grifols attempted a similar operation to externalize assets and debt, but on a larger scale, in 2021 with GIC, Singapore’s sovereign wealth fund, to which it sold a minority stake in its American subsidiary Biomat for $1 billion (840 million of euros) with an option to buy it back. The auditor, KPMG, however, did not endorse this operation and forced the accounts to be reformulated so that GIC’s investment counted as debt. The creditor financial entities of Grifols did agree not to include it in the debt commitments or covenants agreed in 2019, as explained by the financial director, Alfredo Arroyo.
Since 1999, Scranton has grown in the shadow of Grifols, driven by the growth of the group, which from the 211 million euros it was billing at the time has gone to 6,064 million in 2022. And thanks to the dividend provided by the pharmaceutical company, which in 2020 reached 19 million euros, and the rent of the headquarters and the plasma centers, was able to become one of the most relevant family offices in Catalonia.
According to Scranton’s 2022 accounts, audited by the Dutch firm PKF Wallast, to which La Vanguardia has had access, the group had assets of 1,232 million euros, but its purchase was financed mostly with debt: 877 million Euros owed to the bank.
The holding focused investments in real estate development and venture capital (investment in emerging companies or in restructuring): businesses that initially consume capital – which the holding provides by giving loans to subsidiaries – but do not generate income. For this reason, from 2021 the increase in interest rates and the suspension of the Grifols dividend have strained the financial structure: in 2022 it had an operating result of 26 million and paid 34 in interest.
The stock market and reputational crisis caused by Gotham’s accusations come at a difficult time for Scranton, forced to refinance its debt, with a 388 million euro maturity next July at Bank of America.
According to the audit, this entity is the main creditor of the group, followed by Banco Santander (250 million) and CaixaBank (40 million). The group has mortgages on its real estate assets and, as security for the loans, has pledged the shares of its subsidiaries, including those of the plasma collection centers, its own, as well as a package of Grifols shares. In 2021, he even asked for a loan of 173 million guaranteed with shares of Deria – an investment company of the Grifols Roura brothers – to put them as collateral for a loan, which he returned the following year.
Now the CNMV, in the investigation it has launched following the accusations of Gotham City Research, has asked Scranton to provide information about the relations it maintains with Grifols. Financial sources acknowledge that the regulator wants to ensure that the pharmaceutical group is not a guarantor of any of Scranton’s loans, and that it would in any case be Scranton’s shareholders and the founding family who would lose their shares to the creditor bank in in case the investment holding had liquidity problems.
