Icahn drops Illumina board challenge threat, sources say

Illumina

12/03/2024 17:36

By Svea Herbst-Bayliss and David  Carnevali
       NEW YORK, March 12 (Reuters) - Activist investor Carl
Icahn has dropped a threat to mount a new challenge to
Illumina's  ILMN.O  board, sparing the U.S. gene sequencing
company from its second proxy contest in as many years,
according to people familiar with the matter. 
    Icahn, who installed one of his nominees to Illumina's board
last year through a proxy contest, had said in December he
wanted to oust more Illumina directors, blaming them for the
company losing three-quarters of its market value because of
mismanagement and its soured $7.1 billion acquisition of blood
test maker Grail  GRAL.O . 
    Icahn saw little value in a new proxy contest after Illumina
took steps to comply with antitrust rulings to divest Grail, the
sources added. 
    The 88-year-old billionaire investor is pressing on with a
lawsuit he filed against Illumina board directors last year,
accusing them of breaching their fiduciary duty by completing
the acquisition of Grail in defiance of antitrust regulators.
    The sources requested anonymity because Icahn's decision to
abandon a second proxy contest has not been announced. Icahn and
Illumina declined to comment.
    Icahn had been preparing for a second proxy contest against
Illumina for months, getting in touch with potential board
directors and seeking counsel from experts on whether Illumina
shareholders would back him, the sources said.
    Icahn got enough Illumina shareholder support to get one of
three nominees he put forward elected as board directors last
year. Illumina CEO Francis deSouza was subsequently replaced by
former Agilent Technologies  A.N  executive Jacob Thaysen, and
by December, the company announced had plans to divest Grail.
    Illumina founded Grail and spun it off in 2016. Grail went
on to raise funding from investors such as Bill Gates and Jeff
Bezos. Illumina was left with a 12% stake, and decided in 2021
to acquire Grail to enter the cancer early-detection market.
    The deal was opposed by antitrust regulators over concerns
Illumina would stop Grail's rivals from accessing its technology
to develop competing blood-based early cancer detection tests. 
    Illumina proceeded with the acquisition regardless, only to
be slapped with a record 432 millions euro ($466 million) fine
by the European Commision and be ordered to sell Grail. 
    Illumina has said that it will jettison Grail by divesting
it or spinning it off as a separate publicly listed company. The
deal has taken a heavy toll on Illumina, whose business is
otherwise lucrative thanks to its ubiquitous DNA sequencing
machines.  
    Grail's greater-than-expected expenditures and delays in
advancing its tests forced Illumina to writedowns that Icahn
says have totaled $4.7 billion.  
    Credit ratings agency Fitch in December pegged Grail's
annual operating losses to about $600 million. These are due to
Grail's spending to advance its product pipeline and its bid to
get its Galleri test, which can detect more than 50 types of
cancer through blood samples, cleared by health regulators.

 (Reporting by Svea Herbst-Bayliss and David Carnevali in New
York
Editing by Marguerita Choy)
 ((svea.herbst@thomsonreuters.com; +617 233 2138; Reuters
Messaging: svea.herbst.thomsonreuters.com@reuters.net))