Proxy Fight between Illumina and Carl Icahn over Grail Acquisition

Illumina, a leading developer of genetic sequencing technology, is facing a proxy fight over its $7.1 billion acquisition of cancer test developer Grail by activist investor Carl C. Icahn. Icahn, who holds a 1.4% stake in Illumina, has been vocal about his opposition to the deal since it was announced in September 2020. He has called for the removal of CEO Francis deSouza and the return of former CEO Jay Flatley, claiming that the acquisition was a “new low in corporate governance” and has wiped out billions in market value.

Icahn’s Call for Divestment from Grail

In recent statements, Icahn has urged Illumina to divest from its Grail acquisition and focus on its core operations. He claims that the purchase was a financial disaster for the company which cost it $50 billion in market value. He stated that under current macroeconomic conditions, Illumina cannot afford to keep funding Grail and needs to let go of the money-losing business. He also compared Illumina’s situation to Kodak’s, emphasizing that bringing back Jay Flatley would be a step in the right direction to fix the situation.

Illumina Responds to Carl Icahn’s Claims

In response to Icahn’s claims, Illumina issued a statement defending its board and actions in approving the Grail acquisition. The company stated that it interviewed Icahn’s nominees in good faith but that he was “unwilling to compromise”. It also alleged that Icahn’s nominees lacked expertise in health care and genomics and did not have original ideas for how to operate differently. In addition, it claimed that Icahn’s nominees were controlled by him and therefore not independent.

Despite these criticisms, Illumina shares rose by nearly 4% in response to Icahn’s statements. This may be due to the market’s confidence in the company’s long-term prospects, which have been buoyed by its leadership in genetic sequencing technology.

Opposition to Grail Acquisition

Illumina has also faced opposition from U.S. and European antitrust regulators over its planned acquisition of Grail. The European Commission blocked the deal in September 2022, citing concerns that it would stifle innovation and reduce choice in the emerging market for blood-based early cancer detection tests. Last year, Illumina wrote down nearly half the value of the deal, taking a $3.914 billion goodwill impairment charge against third-quarter 2022 earnings.

The Future of Illumina

As Illumina faces opposition over its Grail acquisition, it remains poised to play a significant role in advancing genetic sequencing technology. With its Galleri™ blood detection test planned for commercialization, Illumina is well-positioned to offer innovative solutions for early cancer detection. However, its board will need to navigate pressures from both investors and regulators in order to achieve success.

In conclusion, while Illumina faces challenges over its Grail acquisition, it remains a leader in genetic sequencing technology with strong fundamentals and growth prospects. Its board will need to carefully balance the interests of all stakeholders as it moves forward.

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