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EU regulators were fined on Wednesday Illumina register 432 million euros ($476 million) to close its acquisition of Grail to develop cancer tests without obtaining regulatory approval.
The European Commission fine is 10% of the fine San Diego-based IlluminaTurnover, the maximum allowed under EU merger rules.
It exceeded Illumina’s previous fine imposed by the commission The largest merger regulation fine $125 million, or 1% of annual turnover, was charged to telecoms firm Altice in 2018.
Illumina has already set aside $453 million to cover a possible maximum fine of 10% of turnover, according to a regulatory filing issued earlier this year.
The deal has already cost Illumina huge sums of money. The company’s market capitalization has fallen to nearly $29 billion from about $75 billion in August 2021, the month the company closed. acquisition from the cup.
But Illumina confirms that the deal will “Maximizing shareholder value” And save lives.
In a statement, the commission said Illumina “strategically assessed the risk of a gun-jumping penalty against the risk of having to pay a high break-up fee if it failed to acquire Grail.” Jumping the gun refers to the process of completing a merger before you get regulatory clearance.
Illumina, the commission said, “also considered the potential profits it could get by jumping the gun, even if it eventually had to get rid of Grail.” “Then I intentionally decided to go ahead and close the deal while the commission was still investigating the deal, which was ultimately blocked.”
“This is a very serious breach which requires the imposition of a commensurate fine with a view to deterring such behaviour,” the European Commission said.
The commission added that Grill “played an active role in the infringement”. The Grail Company, based in Menlo Park, California, issued a separate “token fine” of about $1,100. This is the first time the commission has imposed a fine on a takeover target.
An Illumina spokesperson said Wednesday that the DNA sequencing company will appeal the fine. The European Commission’s decision, while expected, was “illegal, inappropriate and disproportionate,” the spokeswoman said.
The European Commission’s Executive Vice President for Europe Fit for the Digital Age, Margrethe Vestager, speaks to the media at Berlaymont, the headquarters of the European Union Commission on September 6, 2022 in Brussels, Belgium.
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The European Commission alleged last July that closing the Grail acquisition was a “serious breach” of EU merger rules that could result in “hefty fines”.
Two months later, the commission blocked The deal was sparked by concerns it would stifle innovation and consumer choice in the emerging market for cancer screening tests.
Illumina resume The decision of the European Commission, arguing that the agency lacked the competence to prevent a merger between the two American companies.
Illumina expects a final decision on an appeal in late 2023 or early 2024. This is also when the company expects a decision on its appeal of a similar order by the US Federal Trade Commission.
However, the company said it would divest Grail if it lost either appeal.
Illumina believes in expanding its availability, affordability and profitability Grail’s Gallery Testwhich can screen for more than 50 types of cancer with a single blood draw.
Republican lawmakers in the United States, dozens of state attorneys general and many advocacy groups have similarly argued that the merger could boost the wide availability of life-saving technology. Those sides sided with Illumina in the company’s ongoing legal battle with the Federal Trade Commission last month.
Illumina’s determination to keep Grail sparked a heated confrontation with activist investor Carl Icahn, who owns a 1.4% stake in the company.
Much of Icahn’s opposition stemmed from Illumina’s decision to close the acquisition without obtaining approval from antitrust authorities in the European Union and the United States.
Illumina shareholders voted to oust former chairman John Thompson in May and install one of Icahn’s nominees.
Weeks later, CEO Francis D’Souza abruptly resigned from his position despite surviving a proxy vote.
Now, Illumina is looking for its new CEO while implementing a cost-cutting plan designed to support the company’s shrinking operating margins.
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