The Espiga Calderón family, minority shareholders of HM Hospitales, intensifies its war against the group’s leadership by expanding the battery of complaints filed against its auditors, including the giant KPMG, before the Accounting and Auditing Institute (ICAC ) of the Ministry of Economy, as a previous step to the judicial process. The complaints state, based on reports from an external expert, that the accounts of the HM parent company “suffer from important errors and significant irregularities” and do not reflect the true image of the company that controls the Abarca Cidón family, one of the most important of the private health sector in Spain.
The Espiga Calderón, second shareholders of HM (4.054%), have rejected the exchange equation proposed in the capital increase that is finalizing its parent company, Medical and Business Professionals (PME), to absorb Abacid, the laboratories of the Abarca family. In the framework of this conflict, they have extended to KMPG, PME and Abacid auditor, the complaints filed in October with the ICAC against two other firms hired by HM to validate this share exchange, PKF and Eudita Persevia. The reason for the extension of the complaint registered this Wednesday in the ICAC is a self-loan of 40 million euros that the laboratories granted to two family patrimonial companies shortly before considering its absorption by HM.
In October 2019, Abacid requested a loan from Caixabank with an opening commission of 600,000 euros, a nominal interest rate of 1.25% and maturity on December 31, 2026 whose beneficiaries are the owners of these laboratories, Cidotama SL and Alma Terra Mater, two companies with which the Abarca diversify their assets in other sectors in addition to healthcare, such as education arranged in Madrid through the Educare group, real estate or hotel.
The Espiga Calderóns denounce, based on an external report, that Abacid got into debt with this loan, which represents 77% of its assets, despite lacking sufficient assets to guarantee its return, and that if the absorption of the laboratories is consummated, “It would be transferring to PME the credit risk of the account receivable for 40 million delivered to the partners, thus harming the minority shareholders of PME.” And they believe that the Abacid accounts validated by KMPG have “serious formal errors” and do not offer sufficient information on the exposure to that risk or the guarantees provided.
Abarca sources indicated in October that this self-loan was carried out on the advice of the auditors Eudita and KPMG, “to distort the assessment as little as possible” in the absorption of Abacid. It was “convenient” for the financial burden to be “similar” to that of PME, so that both had the same proportion of debt and operating profit (ebitda). “It is something that falls within the norm, seen by an auditor, reviewed by a third party designated by the Commercial Registry,” they said then.
“It is hard to believe that the auditors are exclusively singled out and that they propose to do something so crude, I hold them in better esteem,” says Lorenzo Espiga Calderón. The representative of the unruly minorities advances that he will claim through the courts the fees and the clinical analysis contracts made by Abacid for HM after having formally requested them without success. They have also urged that HM request offers from other laboratories for the provision of these services, along with a market study and a forensic. They suspect that the profitability generated by Abacid in recent years is excessive and that the prices it charges HM are out of the market.
Lorenzo Espiga Calderón maintains, based on an external report, that Abacid has achieved a profitability of 226% in recent years, which contrasts with an average 8% in its sector, and has distributed to the Abarca some 10 million annual benefits after obtain about 70% of your billing from HM Hospitales. “Let each draw their own conclusions,” he says.
The Espiga Calderóns were part of HM’s board of directors until 2017 and have been trying to sell part of their package for some time, whose effective weight the Abarca (owners of 93%) reduce to 2%, since half of those shares have their rights suspended political and economic. The unruly parties reached an agreement to sell that 2% to a Spanish venture capital fund, Queka Real Partners, but the Abarca blocked the operation trying to exercise a pre-emptive right at a much lower price.
The second shareholders of HM are seeking support from other minorities in the face of a possible syndication of their shares and have denounced the absorption of Abacid before the ICAC because they understand that the exchange equation harms them by undervaluing the group’s parent company. His complaints against the auditors are the step prior to the possible challenge of the shareholders’ meeting that approved the operation on October 7. It would mean opening another judicial channel after the lawsuit they filed against the entry into HM of two Abarca companies, Alma Terra Mater SL and Cidotama SL, without informing the other shareholders. The complaint was admitted for processing, as it advanced The confidential in March. The trial has a preview scheduled for February. While this procedure is being resolved, the Espiga Calderón unsuccessfully claimed that these two Abarca companies, which have 18% of HM, also have their rights suspended out of respect for the principle of equality between shareholders.
The absorption of Abacid has not yet been registered in the Mercantile Registry because HM gave a period of two months, which expires on Monday, to the dozens of doctors participating in its subsidiary HM Hospitales 1989 to decide whether to go to the capital increase and they become partners of the parent company, assuming “an obligation to sell to the company at an appraised price at the time of separation from the group, the same as that granted by the new shareholders since 2011”, according to the minutes of the meeting of shareholders who raised this operation in June. It is a “common” clause in many companies, according to HM, which indicates that up to Monday, more than one hundred shareholders had attended the expansion, two thirds of the total, which shows the “very good reception” of an operation whose benefits for all its shareholders defend.
The Espiga Calderón version is very different. The expert report on which they base their complaints before the ICAC indicates that PME’s accounts “contain accounting irregularities” in the registration of different assets acquired in recent years and omit “relevant information to know the scope of different corporate operations.” It adds that “PME’s annual accounts have had to be restated on numerous occasions to correct past errors, which highlights the lack of rigor with which they could have been formulated.”
This expert indicates that the reports of the PKF auditor to support the integration of Abacid “do not contain any independent assessment of the companies involved, but have limited themselves to assuming the assessments and projections delivered by the PME Board of Directors as good.” And that the valuation report issued in July 2019 by another of the firms hired by the Abarca to support the operation, Eudita, “contained serious methodological errors.” Based on these reports, the Espiga Calderóns question the exchange equation because they understand that it harms them, by valuing the hospital group at almost 1,000 million less than what, they say, would be its real value, which in a conservative estimate, based on the method Discount of Cash Flows, its expert figure in 1,300 million.
With an important presence in the Community of Madrid, HM operates in a sector that the pandemic has made strategic, countercyclical and that has been in the crosshairs of some of the largest investment funds in the world for years. Before the coronavirus, the HM Hospitales group had a forecast of reaching 97 million Ebitda in 2021. A forecast that could alter the health emergency.
According to the individual accounts for 2019 that PME formulated in April and that it just submitted to the Commercial Registry, the COVID-19 crisis “will logically have an impact on the results of 2020. There is an increase in patients related to this pandemic with Very high levels of hospitalization in Madrid, where facilities have been expanded, but at the same time a significant reduction in the volume of emergencies, outpatients and scheduled surgeries. To date, the possible agreements that can be reached with insurance companies and the sector are unknown. public regarding the involvement, collaboration and help that the Group has given to patients in this crisis. ”