It has been a very difficult three months for the company, the workers and the Grifols family", acknowledges Thomas Glanzmann, executive chairman of Grifols, after taking stock of the earthquake that the company has experienced with the three attacks it has suffered by of the bearish fund Gotham City Research.
In an interview given to La Vanguardia together with the new CEO, Nacho Abia, Glanzmann emphasizes that the company "enters a new stage with the addition of the new executive, and turns the page on the Gotham episode after having managed to auditors and the CNMV to ratify the accounts, to agree the sale of its Chinese subsidiary Shanghai RAAS and to have a bond issue of 1,000 million euros on track to cover short-term maturities. "To address our challenges we will need some time", he acknowledges, but "we have all the pieces to continue to be successful in the future". Lessons have been learned from the bearish attack, says Abia: "We will work so that there will never be another Gotham report that questions what we do."
The president of the firm attributes to the Grifols family the merit of assuming that "it was necessary to rethink all the parts, including their participation in the management", and in this context "they offered me to join, since he knew the business well and had a relationship with Grifols for 17 years, in addition to more than 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 for the sale of the Shanghai RAAS stake to Haier, the recovery of operating profit or ebitda, which in adjusted terms had increased 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 soared 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 ratified by the auditors, and wanted to review them all focusing on transactions that took place four and six years ago, and examined our relationships and transactions with related parties, which have always been done on market terms, and 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 over 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 have been left behind", he points out.
The company will introduce other changes to "continue to improve our governance" and make the two key committees, the "audit and the compensation committee, 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 the crisis. "It was a touch of attention", he admits. Grifols "is a complex company, following its great growth" and the lesson is that "we must work to reduce this complexity and to increase the clarity of our explanations to the market, which is what allowed the Gotham report to generate those concerns. We will work to ensure 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 done so in public as well", he acknowledges. However, what hurt them the most, Abia points out, "is the ignorance of the public, and of many investors, of what Grifols is, of the success story for Spain and for 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", admits Glanzmann, with reasons or not. "The short sale is perfectly legitimate. What is not correct is to manipulate the market with a report that does not reflect reality, as they did." In his opinion, his case has made Spain and the United States aware of "how a manipulation of the market, a report, can put a company like ours at risk when it shouldn't be". He also considers that the debate on the legal framework has been opened. "The financial groups act according to the laws and regulations of each place, and if they can do something like that, they do it", stresses Abia.
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 "presents challenges for us in the short term", has allowed them to "buy businesses that are fundamental to the future of Grifols". A company "always calculates the risks. But, obviously, no one could foresee that we would have a pandemic or that the environment of interest rates would change so drastically and for so long", he says.
As an example, the purchase of Biotest: a company "in transition", which for the moment slows down the profitability of the group until it brings its new medicines to the market, starting in 2026. "This illustrates how capital intensive it's this business. You have to make the investments years before the return comes. The decision must be taken at the right time, because if you don't miss a train it 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 is important and Grifols did the right thing in taking advantage of all the opportunities for growth and market consolidation. The covid did not catch us at the best time, certainly. But other companies that did not take advantage of the opportunities to grow are now very small players and have no chance of achieving the scale that Grifols already has”.
The company already started last year to reduce its debt ratio, Glanzmann explains, and this year it will additionally do so with the sale of its stake in Shanghai RAAS. In the meantime, it is completing 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 a week or two," says Glanzmann. "The amount of institutional investors that have contacted us to participate has been extraordinary and says a lot about the confidence of the market in the future of the company, in our growth and our ability to repay the debt", emphasizes Abia.
The CEO adds that sales have already fully recovered and are growing strongly, while operational restructuring has increased the company's profitability and continues to improve it. "The main focus now is on generating cash flow, the last element of this recovery, and providing a clear picture to the market about how we will deal with the payments we have pending and regaining everyone's full confidence."
The cash flow will be used to reduce debt and undertake investments that will drive the group's growth. Among the pending tasks, they acknowledge, is also the buyback 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 no rush. We feel comfortable with these assets because they are absolutely under our control, and we manage them. When our balance sheet allows us to do so, given the rest of our priorities, we will undoubtedly buy them back," explains Abia.
The separation between the company and the owning family will not, however, mean a change of brand, a possibility that the group rules out completely. “Grifols is a phenomenal brand, well recognized everywhere. We are very proud of the name and what it stands for, providing life-saving products for patients around the world. There are absolutely no reasons to change it", emphasizes the company's CEO.
