Grifols slides as Brookfield pulls out of takeover talks

Private equity firm Brookfield has said it is withdrawing from negotiations to take over Grifols, sparking a slump in the Spanish pharma group's share price.

The Canadian investment group said it had been unable to agree on the value for the drugmaker, and its exit from the process comes after Grifols' board advised shareholders not to accept a €6.45 billion offer for the company.

Shares in Grifols – which has been battling months of disruption, prompted by a hedge fund's claims that the company had manipulated its financial reporting – slumped 13% after news of the breakdown in negotiations emerged.

In a statement, Grifols said Brookfield's offer "was deemed to significantly undervalue the company's fundamental prospects and long-term potential" and failed to take into account "the company's robust financial performance […] which demonstrates Grifols' strong fundamentals and its ability to capture substantial global demand across key markets."

Barcelona-based Grifols has seen its stock value plummet since January, when short seller Gotham City Research accused the company of manipulating debt and earnings reporting by consolidating profit from businesses that were sold to a 'vehicle' owned by its founding family.

The report claimed that Grifols had artificially reduced debt to around six times earnings when it should have been a multiple upwards of 10, with a resulting 35% decline in its shares that wiped more than €3 billion off the company's value – despite its assertions that the allegations were false. The Spanish authorities have since launched an investigation into the matter.

Its current share price of €9.69 gives it a paper valuation of around €6.2 billion, having dipped below €6 billion at one point.

Brookfield expressed its interest in making a bid for the company in the summer, reportedly in collaboration with shareholders linked to the Grifols family, but has now confirmed that it is "not in a position to continue with a potential offer."

First formed in 1909, Grifols is a manufacturer of plasma-based pharmaceuticals and other products like blood transfusion diagnostics, which is tax-domiciled in Ireland and has a significant presence in the US.

A spokesperson for the Grifols family told the Financial Times that it will not support any further transactions and "believes that the company has great value and will continue to expand as it has done for over 115 years."

In its third-quarter results released earlier this month, Grifols reported a 12% increase in revenue to €1.79 billion, led by its biopharma division, with operating profit up almost 27% to €462 million.

It has said it is anticipating a period of strong growth on the back of its recently FDA-approved intravenous immunoglobulin product Yimmugo, which it expects to become a $1 billion product within the next seven years, as well as a new bi-weekly dosing approval for Xembify and pipeline products fibrinogen and trimodulin.