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Illumina's Next Steps for Grail Divestiture
Illumina execs shed light on divestiture plans.
Amanda Pedersen
January 18, 2024
3 Min Read
As Illumina proceeds toward its Grail divestiture, which "exit" will it ultimately take? The company is currently considering a capital markets transaction (likely in the form of a spinoff or sponsored spinoff), or a third-party sale.Photo Illustration created in Canva by MD+DI using image by Greg Pease / Stone via Getty Images; Illumina logo courtesy of Illumina.
Some unanswered questions linger, but llumina executives recently shed some light onto its planned Grail divestiture.
After more than two years of figuratively duking it out with U.S. and European antitrust enforcers – not to mention taking heat from activist investor Carl Ichan – San Diego, CA-based Illumina conceded the fight for Grail in December. Last week, at the annual J.P. Morgan Healthcare Conference, Illumina's top executives shared a bit more color about the pending divestiture.
Illumina CEO Jacob Thaysen said the company is working “very diligently to resolve Grail as quickly as possible,” with the goal of finalizing the terms by the end of the second quarter of 2024. He said the divestiture will either be in the form of a capital market transaction, or a third-party sale.
“As you're aware, potential outcomes might impact our balance sheet. And while it's too early to provide guidance on the specific details, we're certainly working to minimize any impacts,” Thaysen told investors in attendance.
Some options the company is exploring may involve Illumina providing financial support, but the company's new CEO said that to the extent the company needs to provide funding, it will most likely issue debt while prioritizing its investment ratings. Thaysen took the helm at Illumina in September.
J.P. Morgan’s Rachel Vatnsdal pressed for further details in the Q&A following Illumina’s prepared comments.
"But specifically, what type of divestment options are most likely at this point? And then how is Illumina thinking about Grail from a valuation standpoint, especially given some of the moving pieces there," the analyst wanted to know. "And then how does that come into the valuation equation and potential net outcome for Illumina?"
"The process right now is we are all options on the table," said Joydeep Goswami, Illumina's CFO and chief strategy and corporate development officer.
Broadly speaking, Goswami said that if Illumina pursues a capital markets transaction, it would likely be in the form of a spin or, "some sort of sponsored spin."
He said it is too early to talk about potential valuations and to "let the market drive that process."
How Illumina arrived at this complicated Grail juncture
September 2020: Illumina announced it would acquire Grail, a company it previously spun out in 2016. The announcement came as Grail revealed plans to go public.
Late March 2021: The FTC filed a lawsuit to block the deal, citing anticompetitive concerns for the U.S. market for multi-cancer early detection tests.
April 2021: the European Commission Directorate General raised concerns about the proposed acquisition.
August 2021: Illumina closed the Grail deal anyway, arguing that Grail does not conduct business in the European Union and questioning the European Commission's jurisdiction to review the merger. The firm did, however, commit to working through the ongoing FTC process and running Grail separately until an outcome was ultimately reached in the U.S. courts.
March 2023: Ichan sharply criticized Illumina's decision to acquire Grail before regulatory agencies approved the deal, thus launching a heated proxy battle.
May 2023: Shareholders gave the boot to John Thompson, Illumina's chair. However, Icahn failed to get two other nominees on the board.
July 2023: The EU delivered a haymaker to Illumina in the form of a $476 million fine for continuing with the Grail acquisition.
October 2023: European regulators ordered Illumina to divest Grail.
December 2023: Illumina conceded its fight for Grail, announcing the planned divestiture, after the U.S. Fifth Circuit Court of Appeals ruled in agreement with FTC that there was evidence the acquisition was anti-competitive.
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