ADVERTISEMENT

Business

Banks to Pitch Roughly €11 Billion Buyout Debt for Grifols

An entrance gate to a Grifols SA facility in Barcelona. Photographer: Angel Garcia/Bloomberg (Angel Garcia/Bloomberg)

(Bloomberg) -- Banks are getting ready to submit final offers to Brookfield Asset Management for a debt package of about €11 billion ($11.6 billion) to back the take-private of Spanish pharmaceutical producer Grifols SA.

Lenders are preparing to send final proposals next week, with the expectation that a bank group will be appointed by the end of the month, according to several people familiar with the process, who asked not to be named because the matter is private. 

The final debt package will include leveraged loans and high yield bonds, denominated in euros and dollars in order to tap into as much liquidity as possible. There will also be an undrawn revolving credit facility, the people said. 

While it’s normal for a certain amount of back-and-forth to take place before banks are appointed, the Grifols deal has taken an unusually long time to complete. Lenders have grown frustrated by the number of proposals and Brookfield’s due diligence process, the people said. It’s now likely that financing will be agreed to this year and sold on to investors next year if the deal goes ahead.

Grifols’ bonds due in 2028 gained as much as 3 cents on the euro to around 96 on Thursday, according to data compiled by Bloomberg. 

Strong Competition

Including debt, the deal will likely rank as the biggest takeover of a publicly traded European company since at least 2022, according to data compiled by Bloomberg. It’s expected to attract strong competition among banks due to a recent dearth of M&A financings. A massive 22 banks got involved in an €8.65 billion debt financing backing a stake purchase in drugmaker Sanofi, which is likely to come to market next year.

Brookfield said earlier this year that it, along with the founding family which owns more than a third of the firm, was interested in taking the Spanish drugmaker private.

Morgan Stanley and Goldman Sachs are sellside advisers in the Grifols deal, the people said, while Lazard is advising Brookfield and the founding family. Spokespeople at Morgan Stanley, Goldman Sachs, Lazard, Brookfield and Grifols declined to comment.

A maker of medicines produced with blood-plasma, Grifols is a well-known borrower in the European and US debt markets, with around €8.5 billion of bonds and loans, according to data compiled by Bloomberg. If the buyout is successful, then a take-private will trigger a clause that allows bondholders to demand that the debt be paid back early, and above par.

The firm has had a turbulent year since short-seller Gotham City Research accused it of manipulating its accounts. While Grifols denied any wrongdoing, the attack sent its shares and bonds into a tailspin, and the volatility was compounded over subsequent months by a trickle of bad news, including concerns over cash flow and accounting adjustments on investments in China. Grifols’ leverage levels have been under scrutiny and its credit rating has been downgraded by three agencies since March.

The company sought to calm investors by naming new management and removing the family from executive positions.

(Updates with bond pricing move in fifth paragraph)

©2024 Bloomberg L.P.