Illumina Gets Formal EU Order to Undo $7 Billion Grail Deal

Illumina Inc. was formally ordered to undo its $7 billion acquisition of cancer-test provider Grail Inc. as the European Union ramped up a legal fight over a deal the firms completed without its permission.

The European Commission on Thursday ordered Illumina to unwind the transaction, such that Grail’s independence is restored and that the firm is “as viable and competitive after the divestment as it was before Illumina’s acquisition.”

“Today’s decision restores competition in the development of early cancer detection tests,” EU Commissioner Didier Reynders said in a statement. “By ordering Illumina to restore Grail’s independence, we ensure a level playing field in this crucial market to the ultimate benefit of European consumers.”

The EU’s order follows the commission’s veto last year over concerns the tie-up would have “stifled innovation and reduced choice” in the emerging market for blood-based early cancer detection tests. In July, Illumina was hit with a €432 million ($459 million) fine for closing the deal before getting regulatory approval.

Grail was spun off from DNA sequencing giant Illumina in 2016 to develop a blood test to detect 50 types of early stages of cancer. Illumina sought to buy back the startup and provoked authorities by closing the deal in August 2021 despite pending investigations.

The deal has been mired in regulatory controversy on both sides of the Atlantic — sparking a series of court cases. Illumina has challenged EU and US vetoes of the deal and yet another dispute is on the cards now Brussels regulators have carried out their threat of ordering a divestment.

San Diego-based Illumina said in a statement that it’s “currently reviewing the divestment order” from the commission.

The EU watchdog on Thursday ordered Illumina and Grail to remain separate until the transaction is unwound, while also calling for Illumina to support Grail’s cash needs to allow it develop and launch its easy cancer detection test Galleri.

If Illumina fails to comply with the order, it could face hefty fines of up to 10% of its annual global turnover, or periodic penalty payments of up to 5% of average daily aggregate turnover.

Illumina last month named Agilent Technologies Inc.’s Jacob Thaysen as its next chief executive officer after former CEO Francis deSouza abruptly left the firm amid an investor proxy fight with billionaire investor Carl Icahn, who backed the leadership change.

Ahead of the EU’s order, Illumina said in a presentation to investors on Wednesday that it would “divest Grail if we lose either the final U.S. 5th Circuit or EU jurisdictional appeals.”

Among its legal battles with the EU, Illumina has argued that the commission had no jurisdiction over the transaction, which is between two American companies with no foreseeable impact on competition in Europe.

One of the disputes is seen as a test case for a new EU policy to pick up takeovers of low- or zero-revenue targets that previously sneaked under the antitrust radar despite posing a risk to competition.

To contact the reporters on this story:
Samuel Stolton in Brussels at sstolton@bloomberg.net;
Stephanie Bodoni in Luxembourg at sbodoni@bloomberg.net

To contact the editors responsible for this story:
Jeremy Hodges at jhodges17@bloomberg.net

Peter Chapman

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