Illumina to unwind $8B deal to acquire Grail, will divest holdings

Gene sequencing company Illumina Inc. this weekend announced it was divesting from Bay Area cancer diagnostic test maker Grail.

For more than two years, the companies fought multiple efforts to derail Illumina's efforts to acquire the health tech firm which has 1,300 employees, including 500 at its Menlo Park headquarters..

Besides opposition from European Union regulators about the sale, Carl Icahn also sued San Diego-based Illumina   (Nasdaq: ILMN) in October. The American activist investor accused Illumina of "breaching their fiduciary duties" regarding the Grail acquisition.

Icahn's lawsuit followed the European Commission's order that Illumina unwind the $8 billion deal. In July, the E.U. had fined Illumina $476 million for closing its acquisition of Grail.

"The divestiture will be executed through a third-party sale or capital markets transaction, consistent with the European Commission's divestiture order, with the goal of finalizing the terms by the end of the second quarter of 2024," Illumina said in its official statement.

Opposition to the deal came from both E.U. and U.S. regulators who voiced concerns that Illumina's dominance of next-generation sequencing systems, which companies use to detect cancer from simple blood tests, would limit choice just as the diagnostics market is emerging.

Making the acquisition his focal point, in January Icahn won a board seat during a proxy fight with the company, arguing that the Grail deal would cost investors billions of dollars.

Speaking at the 3D Monitor Active-Passive Investor Summit in New York on Oct. 13, Icahn said he had no choice but to sue the board.

"I have done so today in light of, among other things, the board's unconscionable and egregious actions relating to closing the acquisition of Grail without regulatory approval, thus putting Illumina, a great company, in harm’s way," Icahn said, according to an account in Reuters.

In ordering the dismantling of the deal, the European Commission said Illumina closed the August 2021 deal despite regulators' concerns the merger would stifle innovation.

"Illumina and Grail unlawfully completed the merger during the Commission's in-depth investigation, in breach of EU merger control rules," the Commission said in a statement. "With (the) decision, the Commission has adopted restorative measures requiring Illumina to divest Grail and restore the situation prevailing before the completion of the acquisition."

Illumina's divestment comes on the heels of a U.S. appeals court decision Friday that the Federal Trade Commission (FTC) conduct a new review of the acquisition. According to Reuters, the court said the agency had applied the wrong legal standard in its initial arguments.