Carl Icahn says Illumina’s appeal of FTC order to divest Grail is ‘an almost impossible battle’

Carl Icahn on Wednesday said Illumina‘s efforts to appeal a Federal Trade Commission order to divest the highly contested Grail acquisition “is an almost impossible battle.” 

Illumina on Monday told CNBC it intends to appeal the FTC’s order in federal court, and will seek an expedited decision. That appeal will come “at great expense” to the DNA sequencing company, the activist investor argued in his latest open letter to shareholders.

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“Our major concern as a large shareholder is that this multi-year battle will consume hordes of cash and go on for years, luxuries that Illumina does not have,” Icahn, who owns a 1.4% stake in Illumina, wrote. 

The company’s market value has already fallen to roughly $36 billion from about $75 billion in August 2021, the month it closed its acquisition of cancer test developer Grail. 

Icahn launched a proxy fight over the Grail deal last month, seeking seats on Illumina’s board of directors and pushing the company to unwind the deal. He shares common ground with the FTC, which argued in its order that the $7.1 billion deal would stifle competition and innovation. 

The FTC’s order reverses an administrative judge’s September ruling, which dismissed the commission’s initial challenge to the Grail deal. 

In his letter, Icahn highlighted Illumina’s “long history” of appealing regulatory challenges to the acquisition.

The company last year appealed a similar order by European Union regulators to unwind the Grail deal. The EU’s executive body, the European Commission, in September blocked Illumina’s acquisition over concerns that it would hurt consumer choice and innovation.

San Diego-based Illumina expects a decision on its appeal of the European Commission and FTC orders in late 2023 or early 2024. 

The company on Wednesday said in a statement to CNBC that it has a “strong case on appeal” of the FTC’s order. It pointed to how it prevailed over the commission last year. 

Illumina also pushed back on the latest order. 

“The FTC’s decision runs afoul of legal precedent and is inconsistent with the overwhelming evidence that reuniting Illumina and GRAIL will promote competition and save lives,” Illumina told CNBC. 

Shares of Illumina closed relatively flat Wednesday afternoon.

Icahn on Wednesday took more shots at Illumina’s CEO Francis deSouza after ratcheting up criticism of the executive — and his pay raise — last week.

He added that the Grail deal is deSouza’s “second major M&A failure” since he stepped in as CEO in 2016. In 2020, Illumina called off a $1.2 billion merger with Pacific Biosciences of California after the FTC challenged the acquisition.

Icahn repeated his call on Illumina to replace deSouza with the company’s former CEO Jay Flatley or “someone else on his level.”

Last week, Icahn said the company needs “someone who knows what they’re doing to fix the situation.”