Illumina Faces Allegations from Carl Icahn over Grail Acquisition Deal

Carl Icahn Accuses Illumina’s Directors of Demanding Additional Insurance

Carl Icahn, the activist investor and owner of a 1.4% stake in Illumina, has accused the DNA sequencing company’s directors of demanding additional personal liability insurance before signing the deal to acquire Grail, a cancer test developer. This new allegation is the latest development in a brewing proxy fight between Icahn and Illumina, which has been ongoing since 2021.

According to Icahn, the demand for additional insurance was made a day before the Grail acquisition deal was signed. The insurance was disclosed three months after the deal’s closure in a routine filing to the Securities and Exchange Commission. Icahn has criticized Illumina’s board for not informing shareholders about other negative information related to Grail.

The European Commission also blocked Illumina’s acquisition of Grail citing concerns that it would hurt consumer choice, resulting in a fine of up to 10% of Illumina’s annual revenue. The deal is also facing scrutiny from antitrust regulators in the US. Despite these challenges, Illumina has challenged the European Commission’s decision and argued that they lack jurisdiction to block the merger between two US-based companies.

Carl Icahn Urges Illumina to Bring Back Former CEO Amid Proxy Fight

Icahn is pressing Illumina to bring back its former CEO, Jay Flatley, immediately amid their ongoing proxy fight. Flatley led the company for 17 years and is credited with its high growth during that time. The current CEO, Francis deSouza succeeded Flatley in 2016.

Illumina shares surged by nearly 4% following Icahn’s comments. He has criticized current management and urged them to unwind the “disastrous” $7.1 billion acquisition of Grail, which he claims has wiped out $50 billion in the company’s market value. Icahn believes that Illumina can’t afford to keep Grail under current macroeconomic conditions and should focus on their core business.

Illumina and Carl Icahn Spar Over the Grail Acquisition

Illumina’s board members required additional personal liability protection before signing off on the Grail acquisition, which Icahn alleges was a condition for their approval. The activist investor called the acquisition a new low in corporate governance as antitrust regulators had opposed it.

Illumina defended the board’s actions, stating that such insurance and indemnification were standard for Delaware-incorporated companies. Nevertheless, Icahn is seeking to change Illumina’s board and plans to nominate three allies at the upcoming annual meeting.

Illumina announced its plan to buy Grail in September 2020 to accelerate the commercialization of its Galleri blood detection test. However, due to negative capital market conditions and higher discount rates, Illumina wrote down nearly half the value of the deal. A final decision on the European Commission’s block of the deal is expected this spring.

Conclusion:

Carl Icahn’s allegations against Illumina regarding the Grail acquisition deal have created a stir in the biotech industry. One of Illumina’s biggest investors and activists, Icahn is pushing for board seats at the DNA sequencing company and is urging them to unwind their deal with Grail. He is sparring with Illumina over his allegations that their directors demanded additional personal liability insurance before signing the deal with Grail. The company has defended its position and claims that such insurance is standard. Nevertheless, this battle between Icahn and Illumina could impact the future direction of one of Biotechnology’s leading companies.

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