Grifols To Launch A Takeover Bid For Germany’s Biotest At €1.6 Bn

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Grifols and Tiancheng Pharma, the main shareholder of Germany’s Biotest, have agreed the Spanish firm will buy Biotest with the aim of increasing its plasma collection capacity. Tiancheng Pharma owns 89.9% of Biotest’s ordinary shares and 1.1% of the preferred shares.

The company has 26 plasma centres in Germany, the Czech Republic and Hungary, can process up to 1.5 million litres of plasma per year and plans to double its capacity by 2022. It also has a portfolio of 12 different products in haematology, clinical immunology and intensive care medicine, as well as several clinical-stage developments.

Grifols has agreed to launch a takeover bid for 100% of Biotest’s share capital once it receives the relevant authorisations, paying 43 euros/share for each ordinary share and 37 euros/share for each preferred share. It expects to close this acquisition by the end of Q2 2022.

The consideration of 1.6 billion euros (13% of Grifols’ capitalisation) will be paid in cash and represents a premium of 23% and 4% over the closing price on the day before the launch of the offer. The transaction values Biotest at 2 billion euros. Grifols plans to finance the Biotest acquisition by issuing 2 billion euros of debt. It has announced it will not pay cash dividends or make acquisitions until it reduces leverage to below 4x net debt/EBITDA.

Bankinter’s research team has a negative view of the acquisition:

“The price paid is high, it represents an EV/Ebitda of 71x (vs 12x for Grifols) and the deal dilutes Grifols’ EPS by -5%”.

In addition, Biotest has been making annual net losses of 33 million euros for several years”.

“On the other hand, the increase in indebtedness raises Grifols’ estimated Net Debt/EBITDA ratio for 2022 to 4.9x vs our estimate of 3.5x.”

“Finally, the implications for the dividend are negative as we estimate that Grifols will stop paying cash dividends until 2024e, although it will foreseeably offer share payments.”

The pharma company led by Victor Grifols and Raimon Grifols already tried to acquire the company in 2018, at the same time as it closed its purchase of Shanghai Raas. However, it was ultimately unsuccessful. Grifols expects up to €3.3 billion in sales per year from Biotest’s three products. The figure would rise to between €11.9bn and €13.3bn if two other types of drugs also under research are taken into account.

According to analysts at Banco Sabadell, the deal is a good strategic fit for Grifols:

“It will allow it to scale and complement its Biosciences business (80% sales), providing it with 8% more plasma centres and increasing its presence in new geographies (Middle East and Africa) where plasma is also cheaper.

Regarding the financial explanation of the operation, they consider the messages have been very positive and quite detailed.

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The Corner
The Corner has a team of on-the-ground reporters in capital cities ranging from New York to Beijing. Their stories are edited by the teams at the Spanish magazine Consejeros (for members of companies’ boards of directors) and at the stock market news site Consenso Del Mercado (market consensus). They have worked in economics and communication for over 25 years.