Record Fine for Illumina’s Acquisition of Grail

European Union regulators have imposed a record fine of 432 million euros ($476 million) on Illumina for closing its acquisition of cancer test developer Grail without obtaining regulatory approval. This fine represents 10% of Illumina’s global turnover, the maximum allowed under EU merger rules.

This fine surpasses the previous largest merger regulation fine of $125 million, or 1% of annual turnover, imposed on Altice, a telecommunications company, in 2018.

Illumina plans to appeal the fine, stating that the European Commission’s decision is “unlawful, inappropriate, and disproportionate.”

Due to the potential fine, Illumina has already set aside $453 million, equivalent to 10% of its projected 2022 revenue.

Challenges and Impact on Illumina

The European Commission alleged that the Grail acquisition by Illumina violated EU merger regulations and warned of potential hefty fines. The commission later blocked the deal, citing concerns about stifling innovation and consumer choice in the cancer detection test market.

Illumina has appealed the European Commission’s decision, arguing that the agency lacks jurisdiction to block the merger between the two US companies. A final decision on the appeal is expected in late 2023 or early 2024.

If Illumina loses the appeal, the company has committed to divesting Grail.

Expansion of Grail’s Technology and Shareholder Conflict

Illumina believes it can enhance the availability, affordability, and profitability of Grail’s Galleri test, which screens for over 50 types of cancers through a single blood draw.

Republican lawmakers, state attorneys general, and advocacy groups have supported Illumina’s merger with Grail, emphasizing the potential benefits of wider access to life-saving technology.

The merger has triggered a proxy battle with activist investor Carl Icahn, who holds a 1.4% stake in Illumina.

Illumina shareholders voted to remove former board chair John Thompson and appointed one of Icahn’s nominees. Additionally, CEO Francis deSouza resigned despite surviving the proxy vote.

To address shrinking operating margins, Illumina is implementing a cost-cutting plan while searching for a new CEO.