• Grifols has engaged in transactions that have resulted in value destruction, and conflicts of interests are apparent throughout the Board with the Grifols family members, Tomas Dagá, and his partnership at Osborne Clarke Spain.
• Until faced with public opposition from Flat Footed and others, Grifols insiders, with the conflicted Board’s apparent acquiescence and cooperation, had been engaged in a process to capitalize on the Company’s depressed share price to benefit only a few through a frustrated potential take-under transaction.
• The Board’s remaining conflicts underscore the need for a prompt governance overhaul for Grifols. Mr. Herendeen’s appointment is positive news, but the presence of one truly Independent Director on the Company’s 13-member Board is far from sufficient. Change needs to happen to protect non-insider shareholders and unlock Grifols’ value potential.

Flat Footed LLC is the investment manager for FF Hybrid LP, Flat Footed Series LLC - Fund 3, and GP Recovery Fund LLC (collectively, with Flat Footed LLC, “Flat Footed”), holders of an aggregate 4.64% of the voting share capital of Grifols, S.A. (the “Grifols” or the “Company”).

Flat Footed today sent a letter to the Grifols Board of Directors. The full text of the letter follows:

Dear Mr. Glanzmann,

Flat Footed LLC is the investment manager for FF Hybrid LP, Flat Footed Series LLC - Fund 3, and GP Recovery Fund LLC (collectively, with Flat Footed LLC, “Flat Footed”), holders of an aggregate 4.64% of the voting share capital of Grifols, S.A. (the “Grifols” or the “Company”). Flat Footed is the largest non-Grifols family Class A shareholder of the Company. We appreciate the Grifols Board of Directors’ (the “Board”) recent appointment of Paul Herendeen as an external director— after months of needless delay—but there is still wood to chop.

As has been reported in detail, Grifols has been plagued with corporate governance scandals that have shaken shareholder confidence, invited regulatory scrutiny, and caused the Company’s stock to trade materially below intrinsic value. As other shareholders have noted, the Company has engaged in value-destroying transactions, and conflicts of interests are pervasive throughout the Board with the Grifols family members, Tomas Dagá, and his partnership at Osborne Clarke Spain. Although the exact amount is undisclosed, Mr. Dagá has likely received a significant share of legal fees in connection with the 16 separate M&A transactions that Osborne Clarke Spain has advised Grifols on since 2014, putting his interests in conflict with other Grifols shareholders. And until faced with public opposition from Flat Footed and others, Grifols insiders, with the conflicted Board’s apparent acquiescence and cooperation, had been engaged in a process to capitalize on the Company’s depressed share price (caused by the same insiders and Board) to steal value from shareholders in a potential take-under transaction.

This pattern of malfeasance, and the Board’s incurable conflicts, underscores the need for a prompt governance overhaul for Grifols. While Mr. Herendeen’s appointment is positive news, the presence of one truly independent director on the Company’s 13-member Board is far from sufficient. More must be done to protect non-insider shareholders and unlock Grifols’ value potential.

In the months since Flat Footed and other shareholders first sought Mr. Herendeen’s appointment as a voice on the Board for non-insiders, we have received an outpouring of support from other, likeminded shareholders seeking change. Grifols should promptly reform its Board to better serve non-insider shareholders and maximize value for all. Lastly, we were surprised by the Company’s announcement of a second director appointment: Pascal Ravery. The Board said nothing about Mr. Ravery or his appointment during the past several months that outside shareholders have been advocating for the establishment of an independent Board. And we are disappointed by the Board’s lack of any attempt to garner outside shareholder support before making this appointment.

We reserve all rights and waive none.

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Note to Editors:

About Flat Footed

Flat Footed is an investment manager founded in 2016 by Marc Andersen and Paul Carpenter. The firm is a special situation, value-oriented investment manager focused on leveraged, asset-heavy companies with complex capital structures.

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