Illumina faces potential US$453 million fine from European Commission over unapproved acquisition of Grail

USA — In a recent development, Illumina, a prominent US-based biotechnology company, could face a hefty fine of up to US$453 million from the European Commission.

The financial penalty comes as a consequence of Illumina’s acquisition of Grail, a cancer diagnostic test maker, in 2021 without obtaining antitrust approval, according to a report by the Financial Times.

The proposed fine represents a substantial 10% of Illumina’s turnover, surpassing the usual range of 1% to 2% that the EU has historically imposed on companies.

The European Commission had previously directed Illumina to reverse its takeover of Grail in December, after initially blocking the deal.

The commission expressed concerns that the acquisition would impede innovation and create a less competitive environment for blood-based early cancer detection tests.

Consequently, Illumina now finds itself contesting an order demanding the divestiture of Grail within the EU.

Having allocated US$453 million in preparation for a potential fine, Illumina intends to appeal any financial penalty imposed by the European Commission.

The company firmly disputes the commission’s jurisdiction to review the Grail transaction and questions the grounds on which the fine would be imposed.

Illumina asserts that the merger with Grail serves the best interests of patients globally and promotes healthy competition.

In recent years, the European Commission has displayed a strict stance against companies that fail to adhere to merger notification requirements or standstill obligations during regulatory scrutiny.

Illumina’s completion of the Grail acquisition in August 2021 amid an ongoing EU investigation has angered the European Union competition enforcer.

Furthermore, the US Federal Trade Commission is also seeking to dismantle the deal, and a federal appeals court has expedited the review of Illumina’s challenge to the order.

Meanwhile, the departure of Illumina CEO Francis deSouza, prompted by activist investor Carl Icahn’s proxy battle, reflects mounting criticism over the company’s “reckless decision” to finalize the Grail acquisition without obtaining proper permissions in the United States and Europe.

The departure of a CEO can be a significant event, particularly when it occurs under such circumstances.

Proxy battles, which involve shareholders attempting to exert influence over a company’s management or decision-making, can be highly contentious and often indicate significant disagreements between investors and company leadership.

In this case, the departure of deSouza reflects the criticism directed towards Illumina for its perceived recklessness in finalizing the Grail acquisition without adhering to the necessary regulatory procedures.

By proceeding without obtaining proper permissions, Illumina took a significant risk that has drawn scrutiny from both the United States and Europe.

Consequently, Illumina has initiated a workforce reduction strategy as part of its efforts to cut annualized expenses by over US$100 million in 2023.

The unfolding situation surrounding the unapproved acquisition of Grail raises questions about the future of this deal and the potential implications for Illumina’s operations.

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