Mason Capital Management Sends Letter to Spanish National Securities Market Commission Regarding Lack of Transparency by Grifols
Urges Improved Disclosure Around Key Issues for the Benefit of Grifols Shareholders
Mason Capital Management LLC ("Mason"), a registered investment advisor to funds and accounts holding approximately 2.5% of Grifols S.A. ("Grifols" or the "Company") (BME: GRF) (NASDAQ:GRFS) class A shares, today sent a letter to the Spanish National Securities Market Commission (the "CNMV") calling the CNMV's attention to the troubling and value destructive lack of transparency by Grifols and its Board of Directors (the "Board").
In the letter, Mason urges the CNMV to consider the benefits to all Grifols shareholders from improved disclosure around several key issues, including:
- Related-party transactions and conflicts of interest involving Board member Tomas Daga;
- The structure of Grifols' internal legal department and reliance upon Osborne Clarke Spain for legal advice; and
- The terms of Grifols' December 2024 bond issuance, which potentially favors Brookfield at shareholders' expense.
The full text of the letter follows:
January 13, 2025
Comisión Nacional del Mercado de Valores
Edison, 4, 28006
Madrid – SPAIN
Dear Chairman San Basilio:
Mason Capital is a significant Grifols shareholder, controlling ~2.5% of the Class A voting shares. We are writing the CNMV to highlight a severe lack of disclosure on key issues by the current Board of Directors. We urge the CNMV to consider the benefits to all Grifols shareholders from improved disclosure around the following items:
- Related-party transactions by current Board members and potential conflicts of interest
- Lack of customary legal department / failure of fundamental internal controls
- Rumored clause in December 2024 bond issuance which benefits Brookfield at shareholders' expense
Related-Party Transactions and Conflicts of Interest at the Board Level
There are numerous related-party transactions and potential conflicts of interest at the Board which remain undisclosed. Mason has written publicly about these concerns, specifically regarding Board member Tomas Daga's remuneration through legal fees paid to his firm, Osborne Clarke Spain, for its role as sole advisor on Grifols transactions.
Shareholders should understand the specifics of Tomas Daga's remuneration via Osborne Clarke Spain given that, according to Grifols, he "led" significant transactions from his position on the Company's Board. Tomas Daga, through Osborne Clarke Spain, has also been the primary advisor on every Grifols transaction that Mason can identify since 20141. Reliance on a single advisor raises significant governance concerns, especially given the clear conflict of interest between Daga's role on Grifols' Board and his role at Osborne Clarke Spain. These transactions have destroyed substantial shareholder value.
Additional related-party transaction disclosure is critical for shareholders to determine a fair value for their Grifols shares given nonfamily shareholders can take control of the Board and unlock significant value by replacing current Board members who are either conflicted or complicit. The additional disclosure items include:
- Fees paid to Osborne Clarke Spain by Grifols over the past 15 years and amounts received by Board member, Tomas Daga, from Osborne Clarke Spain for the same period
- Tomas Daga's ownership of Osborne Clarke Spain for each year during the same 15-year period
- Tomas Daga's ownership of Scranton Enterprises, either directly or indirectly via Fatjo SL
- Any arrangements between Tomas Daga (and/or his proxy Osborne Clarke Spain) and Nomura or Proskauer Rose
Mason publicly requested the above information via a public letter to Grifols Board on December 4, 2024 but has yet to receive a response2.
Lack of Customary Legal Department / Failure of Fundamental Internal Controls
Mason understands that Grifols may not have an internal legal department, instead relying solely on Tomas Daga and Osborne Clarke Spain for all significant legal advice. Mason has been able to locate only 14 employees in the company's legal department, all of whom list their locations in the United States rather than at Grifols' headquarters in Barcelona3. The geographic separation indicates that there is no internal legal function collocated with management and the Board. The Board needs both internal and independent legal advice and should not rely solely on Mr. Daga and Osborne Clarke Spain; both have clear conflicts of interest about which Mason has alerted extensively.
Grifols should disclose the structure of its senior legal department, including its delegations of authority. Transparency in this regard will enable shareholders to better assess the company's governance and operational efficiency.
December 2024 Bond Issuance Potentially Benefits Brookfield at Shareholders' Expense
In December 2024 Grifols issued a €1.3bn bond with a 7.125% interest rate at the same time another bond with equal ranking and maturity was yielding ~6.0%. The 7.125% bond began trading at ~103% of par upon issuance4. Both data points suggest that the issuance should have priced at an interest rate lower than 7.125%. Press reports immediately following the issuance indicate that a special clause was included to allow an early redemption preferential only to Brookfield and not any other potential buyer5. Credit investors would require a higher interest rate to compensate for the inclusion of such an off-market clause.
Grifols should disclose the 7.125% bond indenture so shareholders can understand the veracity of recent press reports. If true, the abnormally high interest rate was not due to poor execution but rather deliberately paid as consideration for an off-market early redemption provision which favors Brookfield at the expense of shareholders. Favoring a specific potential buyer to the detriment of shareholders would be a clear breach of fiduciary duty by the Board.
We understand Tomas Daga may have retired from Osbourne Clarke Spain on December 31, 2024. We suspect in response to the blatant conflicts Mason and others have highlighted recently. If true, this retirement indicates the conflicts are a real issue the Board now recognizes. However, management, conflicted family shareholders, Tomas Daga, and any current or past Board Members cannot absolve themselves of any historic breaches of duties. The years of conflicted payments to Osbourne Clarke, still undisclosed, Tomas Daga holding the Grifols' family proxy, and the insulation management and board has had from almost any other outside advice does not escape scrutiny because of this retirement. Billions of dollars in shareholder value has been destroyed, likely as the result of blatant conflicts that resulted in breaches of duties by board members.
Mason believes that only with disclosure on the above items can shareholders evaluate conflicts of interest and determine whether the current Board's governance practices align with shareholder interests. The CNMV and all shareholders should consider where the stock would trade given a truly independent board. Given there are long-term investors who do not own Grifols today because of conflicted Board members, the current corporate governance restricts the Company's valuation in the market, harming all shareholders.
Regards,
Kenneth M Garschina
Managing Member
Mason Capital Management
About Mason Capital Management LLC
Mason Capital Management LLC is an absolute return focused investment firm that combines deep fundamental analysis with hard catalysts to drive value creation. Founded in July 2000 by Ken Garschina and Mike Martino, Mason's strategies range from event-driven investing to corporate carve-outs and control acquisitions.
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1 "Mason Capital Management Highlights Corporate Governance Failures and Significant Shareholder Value Destruction Under Grifols Board of Directors", Business Wire, November, 8 2024 (Link)
2 "Mason Capital Management Requests Immediate Disclosure of Important Information Regarding Conflicted Grifols Director Tomas Daga", Business Wire, December 10, 2024 (Link)
3 Per "Legal" section of the company's LinkedIn page, excluding compliance roles
4 ~103% as of December 13, 2024; 7.5% Senior Secured Bond due May 2030 yielding ~6.0% as of January 12, 2025
5 "Grifols Keeps Door Open to Brookfield With Special Bond Term", Bloomberg, December 13, 2024 (Link)
View source version on businesswire.com: https://www.businesswire.com/news/home/20250113198547/en/
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