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Shares of Grifols GRFS lost over 7% on Wednesday after the company announced that Canada-based Brookfield Asset Management has withdrawn its plan to acquire it.
Both parties likely failed to arrive at a common ground over the company's value. Last week, Grifols’ board refused to endorse Brookfield’s offer to acquire its outstanding share capital for €6.45 billion (around $6.8 billion). Per management, the valuation “significantly undervalues the company’s fundamental prospects and its long-term potential.”
This announcement puts an end to months of negotiations between Grifols and Brookfield, which, along with key shareholders of Grifols, had expressed its intent for a potential takeover in July. These key shareholders are members of the Grifols family as well as the founders of the company. Per a Bloomberg article, the Grifols family owns about a third of the company.
Alongside discussions with management, Brookfield was also reportedly in discussion with banks to raise funds for the above transaction. Through these funds, it intended to refinance Grifols’ existing debt, which includes loans and high-yield bonds. This need for refinancing was due to a clause in Grifols' existing debt agreements, allowing bondholders to demand early repayment at a premium if the company is taken private.
GRFS intends to present its strategic vision under the new leadership at an investor event soon.
GRFS’ Stock Performance
Shares of the company plummeted as investors viewed the takeover as an opportunity to exit this highly leveraged company. Based on financials for the quarter ended September 2024 reported earlier this month, Grifols’ net financial debt was €9.2 billion against the liquidity position of €704 million. Investors also expressed concerns about the company’s ability to generate cash flow.
Year to date, shares of Grifols have lost 30.2% compared with the industry’s 4.5% decline.
Image Source: Zacks Investment Research
Other Factors Responsible for YTD Fall in GRFS Stock Price
Another reason for the stock’s downside was an attack by short-seller Gotham City Research at this year’s onset when it released several reports accusing Grifols of overstating earnings and understating debt. These accusations were further exacerbated by negative news surrounding the company’s cash flows and subsequent accounting adjustments on investments in China.
To address the above concerns, Grifols appointed new management and even removed family members from executive roles.
GRFS’ Zacks Rank
Grifols currently carries a Zacks Rank #3 (Hold).