Better to Ask for Permission or Forgiveness?

According to Financial Times, US, New York-listed, biotech company, Illumina, is being ordered by EU regulators to sell cancer test developer, Grail. This comes shortly after Illumina spent $8bn on Grail without the approval of Brussels. This development was reported by three people on the inside of the situation.

This is further punishment for Illumina, the world’s largest gene-sequencing company, after Brussels fined them €432mn in July for defying what regulators described as a “cornerstone” of their authority.

Illumina and Brussels have been in a legal gridlock since the 2021 purchase of Grail, even as EU regulators were still examining whether the deal would hurt competition. Brussels eventually chose to block the transaction, believing it would stifle innovation and limit customer choice. Financial Times reports, "Illumina had disputed the EU’s right to scrutinise the deal, pointing to the fact that Grail does not have any revenues in Europe. It completed the deal in August 2021. Illumina is already challenging a similar order from the US Federal Trade Commission, which in April demanded the sale of Grail, saying the deal would hurt efforts to develop ways of detecting cancer."

An insider with direct knowledge of the matter commented, “They bought something illegally and now they need to sell it.” The fine imposed on Illumina was equivalent to 10% of its revenue — the largest penalty available to authorities for this type of infringement. The commission, when announcing the fine, stated that Illumina had “considered the potential profits it could obtain by jumping the gun, even if it were ultimately forced to divest Grail. It then intentionally decided to proceed and to close the deal while the commission was still investigating the transaction that was ultimately prohibited.” Even activist investor Carl Icahn called the deal "reckless" and pushed for the exit of Illumina’s longstanding chief executive Francis deSouza, who in June agreed to step down.

This long saga ended with a forced divestiture on top of a fine. Simply put, closing a merger before all approvals are received probably wasn't a good idea.

#mergers