(Bloomberg) -- For hedge fund Mason Capital Management LLC, much of what ails Grifols SA can be laid at the door of one man: Tomas Daga. But for the drugmaker, he’s someone who’s helped transform the once-tiny Spanish blood plasma company into a world leader.
As Grifols emerges from a failed attempt by Brookfield Asset Management to take it over, the spotlight is increasingly turning to the behind-the-scenes role played at the company by Daga. A partner at Grifols’ go-to law firm Osborne Clarke, which advises the company on all legal matters, Daga has been a fixture on the drugmaker’s board for decades, driving its strategy. A long-time friend of the Grifols family, Daga is now being targeted by Mason, which wants him ousted from a reconstituted board. The fund accuses him of conflict of interest and acting on the board as a proxy for the family, which owns about 35% of the eponymous maker of medicines for diseases like hepatitis and hemophilia.
Daga is “by all accounts, challenging to work with and has an out-sized personality,” Kenneth M. Garschina, co-founder of the New York-based Mason said in a rare interview. “Daga has effectively pushed away other firms that want to provide advice to the board and to the company; he is a fee-earning partner at Osborne Clarke. As a result of this, the capital allocation’s been mismanaged.”
Daga declined to comment on Mason’s accusations, but said he has offered to vacate his seat and that the board had voted for him to stay. “I will continue working for Grifols’ board and for the company while I’m alive and well,” Daga, who’s set to retire from Osborne Clarke on Dec. 31, said in an interview. “If they sack me, I’ll go home.”
Mason isn’t the first investor to draw attention to the 68-year-old lawyer. In May, in its third report on Grifols, New York-based short-seller Gotham City Research LLC touched on what it said were Daga’s conflicting roles as board member, lawyer to Grifols and shareholder of Scranton Enterprises, a family office that owns a stake in the drugmaker and to which his law firm has lent money. In its first report in January, Gotham accused Grifols of poor governance and misleading accounting.
Scranton declined to comment on Gotham’s report while Grifols has rejected the accusations and sued the short seller in a New York court — a case that’s ongoing. Still, the Gotham report triggered one of the worst years ever for the drugmaker that was founded more than a century ago in Barcelona. It brought changes in the C-suite, with family members ousted from executive roles and outsiders brought in to run operations.
Grifols shares have plummeted, falling more than 40% since the start of the year. As the stock slid, Brookfield entered the picture. The money manager had been looking to take Grifols private in partnership with the founding family, but walked away last week from the €6.45 billion ($6.8 billion) bid after the company’s board rejected it as too low.
The twists and turns have brought greater scrutiny from investors and regulators — in Spain and by the Securities and Exchange Commission in the US — to a company and a family that have always shunned the limelight. Attention has also now turned to issues that have dogged Grifols in recent years — from Gotham’s accusations about questionable asset shuffles to the company’s debt-fueled acquisition binge. That in turn is shinning the light on Daga, who has served on the company’s board for more than 20 years and who investors see as a key figure for the group.
In a statement on Wednesday, Mason said, “The board can prove its independence from Tomas Daga by accepting his resignation.” The fund pushed for information on fees received by Daga and Osborne Clarke, saying “continued lack of disclosure will speak for itself.”
A spokesperson for Grifols said Daga has been consistently reelected to the board, and was supported by about 90% of the shareholders the last two times. While not putting a number on the fees paid to Daga and Osborne Clarke, Grifols said in a statement that its related-party transactions are reviewed by regulators and auditors, who have found no conflict of interest. Daga’s role as a deal adviser has resulted in “significant savings for the company for not having to contract costly M&A services,” it said.
Like the Grifols family, Daga is a native of Catalonia and has known former CEO Victor Grifols Roura since the time they were both young.
“I’ve been working with Grifols since 1980,” Daga said. “I was very young at the time... Grifols was a very small lab in Parets del Valles.” He said he had his own law practice at the time and was the company’s external lawyer, before being associated with Osborne Clarke in 1984. The law firm handles all legal matters for Grifols since the company decided decades ago to do without an internal legal department.
Daga joined the Grifols board in 2000, six years before its initial public offering, making him one of the longest-serving board members of a company on Spain’s benchmark Ibex-35, according to data compiled by Bloomberg. He held seats in different capacities and is currently listed as an “other external” director, having surpassed the maximum allowed time to be considered an independent.
In spite of his long tenure, Daga is not very well known in Spanish business circles, according to lawyers and investment bankers. But for those who’ve done business with Grifols, there’s little doubt Daga plays a crucial role. He signs off on all large deal proposals, according to some top Spanish investment bankers, and was the key driver of the debt-funded deal-making spree that led to the company expanding blood collection in the US, Canada, Europe and Egypt.
Last month, in response to letters from Mason accusing the lawyer of mis-allocating funds, Thomas Glanzmann, Grifols’ non-executive chairman, defended him, saying, “Daga not only led the transactions you mention in your letter but also some others that have completely changed the growth trajectory of the company,” referring to the purchases of Talecris in 2010, Alpha Therapeutics in 2003 and Seracare in 2002.
“I’m in charge of all the deals,” Daga said, also noting that he has “great loyalty for the family, the company, the patients and the donors.”
While the large-scale expansion fueled Grifols’ growth, the chaotic period during the pandemic led to blood collections dwindling and brought into sharp focus the company’s massive debt load. At the end of the third quarter, Grifols’ debt — including leases — stood at €9.2 billion.
In its Nov. 8 letter, Mason highlighted high leverage linked largely to acquisitions as a key vulnerability that opened Grifols to the “spurious” Gotham attack. Osborne Clarke has advised on 16 deals since 2014, according to Mason.
Daga said Mason has questioned his judgment in the past, pointing to the time when he and the hedge fund’s co-founder Garschina agreed to a dinner bet, with the lawyer wagering that Grifols would be able to pull off a sale in China within a certain time frame. The company was able to do the deal, and Mason paid for a dinner this year for the Grifols board at Barcelona’s 99 Sushi Bar, Daga said.
What Grifols needs most of all is “tranquility,” to work on life-saving therapies, Daga said.
“That will only be achieved two ways: either with a take private or that these activists stop,” he said.
(Updates with shares in seventh paragraph.)
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