Carl Icahn Prepares for Proxy Fight at Illumina
Billionaire activist seeks three seats on biotech’s board
Carl Icahn is preparing a proxy fight at Illumina Inc., ILMN -4.24% arguing the biotechnology company cost its shareholders roughly $50 billion by plowing ahead with a risky acquisition despite opposition from regulators.
The billionaire activist plans to nominate three people to the San Diego company’s board, according to a letter Mr. Icahn plans to send to Illumina’s shareholders Monday that was viewed by The Wall Street Journal.
Mr. Icahn says in the letter that he tried to strike a deal with Illumina to avoid a proxy battle.
Once a biotech darling, Illumina was revered for its DNA-sequencing capabilities and was valued at more than $70 billion in summer 2021. But in recent months, its value has plummeted to around $30 billion as the company’s takeover of cancer-screening company Grail Inc. remains in limbo while the company also faces heightened competition from lower-cost rivals.
“We are convinced that at least three shareholder representatives are needed on Illumina’s board to attempt to put an end to this insanity now before the reckless decision making escalates into a no-return situation,” Mr. Icahn writes in the letter.
Illumina said it recommends its shareholders vote against Mr. Icahn’s nominees.
“Illumina has a diverse, experienced board comprised of directors who bring a range of perspectives to the company and represent the interests of its stockholders,” the company said in a statement.
Illumina in 2020 agreed to buy Grail, which develops blood tests for early cancer detection, and closed the deal in August 2021 despite facing antitrust resistance from both the Federal Trade Commission and European Union. Illumina at the time said that if it didn’t do so it could have missed a deadline for completing the deal.
The U.S. has since ruled in Illumina’s favor while the EU has sought to block the transaction. That has meant that Illumina has had to hold Grail as a separate unit.
Mr. Icahn in the letter accuses Illumina of overpaying for a business that made “exactly zero dollars in revenue,” then closing the deal despite not knowing if European regulators would bless it. He writes that holding on to Grail is costing Illumina $800 million annually, and that it faces a significant tax bill if ultimately forced to divest it.
He argues that his nominees— Vincent Intrieri, founder and CEO of an investment fund and two of Mr. Icahn’s deputies, Jesse Lynn and Andrew Teno —would bring experience dealing with crises to the board.
Illumina makes and sells genetic-sequencing machines and the chemicals they use, and its customers include Grail and Grail’s rivals. The company founded Grail and spun off a majority of the business in 2017. Illumina agreed to buy back the part it didn’t already own for $7.1 billion.
The European Union set out the details of a planned order requiring Illumina to unwind its deal for Grail last December. The commission had prohibited the deal earlier in the year over concerns that it would stifle innovation and hurt consumer choice.
Illumina has said it believes divesting itself of Grail isn’t “proportional to the speculative harm alleged by the Commission, especially given the benefits this merger will bring to patients in the E.U. and across the globe.”
Illumina appealed the European Commission’s decision last year and has said it would review strategic alternatives for Grail in case it isn’t able to delay an expected EU divestment order.
Mr. Icahn’s battle with Illumina comes amid a busy start to proxy season, as investors are emboldened by beaten-down prices. Dan Loeb’s Third Point LLC was planning to nominate directors at Bath & Body Works Inc. but recently stood down. Salesforce Inc. and Walt Disney Co. have also drawn big-name activists this year who threatened proxy fights.