Illumina Announces Separation from Grail Amid Legal Battles and Investor Scrutiny

18.12.2023 posted by Admin

Grail Divestment: Illumina's Antitrust Saga

On December 17, Illumina, a company specializing in gene sequencing, announced its decision to separate from Grail, a cancer diagnostic test maker. This move follows more than two years of legal battles with U.S. and European antitrust enforcers and strong opposition from activist investor Carl Icahn.

Illumina, based in San Diego, disclosed that the divestiture would occur either through a third-party sale or a capital markets transaction, with the finalization of terms expected by the second quarter of 2024. Throughout the divestment process, Grail will maintain its independence, backed by committed funding from Illumina, according to a separate statement from Grail.

Valued at $7.1 billion under Illumina's ownership, Grail aims to introduce a revolutionary blood test, referred to as a liquid biopsy, capable of diagnosing various types of cancer.

Despite initially spinning off Grail in 2016 and retaining a 12% stake, Illumina reacquired Grail in 2021, despite concerns about potential competition issues. A U.S. appeals court recently directed the Federal Trade Commission (FTC) to reevaluate Illumina's acquisition of Grail, emphasizing that the agency had used an incorrect legal standard. Although the court acknowledged substantial evidence indicating reduced competition, it allowed the FTC to explore alternative legal strategies to challenge the deal.

Illumina, in response to the Fifth Circuit's decision, opted not to pursue additional appeals. The FTC had expressed worries that Illumina, a dominant provider of DNA sequencing for tumors and cancer cells, might elevate prices or deny access to Grail's test rivals.

Meanwhile, European authorities proposed measures for Illumina to reverse its acquisition of Grail. In July, the European Union imposed a record fine of 432 million euros ($471 million) on Illumina for completing the Grail takeover before obtaining EU antitrust approval. In October, Illumina committed to divesting Grail within 12 months, following the European Commission's directive if legal challenges were unsuccessful.

Illumina recently argued that it has no business operations in Europe, challenging the jurisdiction of the EU competition enforcer. The acquisition of Grail faced additional challenges from investors, including billionaire Carl Icahn, who successfully led a board challenge in May. In October, Icahn filed a lawsuit against Illumina, alleging breaches of fiduciary duties related to the Grail deal.

Illumina's stock price has experienced a significant decline of over 37% this year, leading to a change in the CEO position after Icahn secured a board seat. Despite these developments, Carl Icahn has not provided an immediate response to Reuters' request for comment.
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