Illumina Lands on a Path Forward for Grail Divestiture

Grail is expected to spinoff from Illumina as a public company before the end of this month.

Amanda Pedersen

June 5, 2024

5 Min Read
Blood samples in test tubes in a medical lab
Image by solarseven / iStock via Getty Images

At a Glance

  • The spinoff is expected to be completed on June 24.
  • Illumina will maintain a minority share of 14.5% in Grail.

Grail is expected to become an independent public company on June 24.

Illumina said Tuesday its board has approved the spinoff of Grail, and the cancer blood testing company has applied to list on Nasdaq as “GRAL.”

The news comes nearly three years after Illumina essentially thumbed its nose at antitrust regulators by forging ahead with the contested $8 billion acquisition in 2021 under the leadership of former Illumina CEO Francis deSouza.

Tuesday’s announcement signals an important step forward for Illumina, CEO Jacob Thaysen said, given that the divestiture of Grail has been a priority since a U.S. appeals court ruled in agreement with the Federal Trade Commission that the acquisition was anti-competitive.

“As we prepare to lead the next era of genomics innovation, we believe Grail will play an important role in advancing the industry and improving human health. We will maintain a minority share of 14.5% in Grail and remain excited about Grail’s breakthroughs in the fight against cancer. We also look forward to exploring opportunities where we can support Grail’s work with industry-leading technologies and solutions."

Grail was born as a 2016 Illumina spinoff, but in 2020, the company decided it wanted Grail back.

Illumina CFO looks ahead

Related:Illumina Lies in a Bed of Its Own Making

Tuesday’s announcement also gives recently appointed CFO Ankur Dhingra a clearer view of Illumina’s baseline earnings power going forward.

Dhingra wasted no time getting out in front of investors as he attended the Bernstein Strategic Decisions Conference late last month, just a couple weeks after joining the company.

“My thinking is the back half will give me very clear view into what that is, in terms of then setting the forward-looking strategy, all in terms of where would the earnings growth come from,” Dhingra told Eve Burstein, a research analyst who covers U.S. life sciences tools and diagnostics at Bernstein. “[It] will be great to be in a position where we [are] generating free cash flow and a pretty good amount of it, and then thinking about how will we deploy it, etcetera.”

While he couldn’t clearly layout how said cash would be deployed, Dhingra said he anticipates being “more prudent.”

“We've done [a] few tuck-in M&A, and we [will] probably continue to look at a few tuck-in type M&A as we look at adding any new technology kind of capabilities within our space,” Dhingra said. “And then whatever is the remainder cash, we'll find a way to deploy it.”

He also reiterated that both he and Thaysen’s three near-term priorities are to get Illumina’s core business to growth, get it to top-line growth, and then drive a level of operating performance that is more commensurate with the quality of the business that it is.”

Stock distribution and trading details

  • Illumina shareholders will retain their current shares of Illumina common stock and, on the distribution date, also receive one share of Grail common stock for every six shares of Illumina common stock held at the close of business on June 13, the record date for the distribution. The distribution is expected to occur at 12:01 a.m. ET on June 24, subject to customary conditions such as the effectiveness of the registration statement.

  • Illumina's board has declared a pro rata dividend of 85.5% of the outstanding common stock of Grail to Illumina's shareholders, and Illumina will retain 14.5% of the outstanding shares of Grail common stock.

  • Fractional shares of Grail common stock will not be distributed to Illumina shareholders. Instead, the fractional shares of Grail common stock will be aggregated and sold in the open market, with the net proceeds distributed pro rata in cash payments to Illumina shareholders who would otherwise receive a fractional share of Grail common stock.

  • No action or payment is required by Illumina shareholders to receive shares of Grail common stock or cash in lieu of fractional shares. An information statement containing details regarding the distribution of the shares of Grail common stock, Grail’s business and management following the spin-off, and other information regarding the spin-off will be made available to Illumina shareholders prior to the distribution date.

  • For U.S. federal income tax purposes, Illumina's U.S. shareholders (other than those subject to special rules) generally should not recognize gain or loss because of the distribution of Grail shares, except with respect to cash received in lieu of fractional shares. Illumina shareholders are urged to consult with their tax advisors with respect to the U.S. federal, state, and local or foreign tax consequences, as applicable, of the spin-off.

  •  Beginning on or about June 12, and continuing until, but not including, the distribution date, it is expected that Grail common stock will trade on a "when-issued" basis on Nasdaq under the ticker symbol "GRAL WI." On Friday, June 21, when-issued trading of Grail common stock will end and on Tuesday, June 25, Grail common stock will begin trading "regular way" on Nasdaq under the ticker symbol "GRAL." Illumina will continue to trade on Nasdaq under the ticker symbol "ILMN."

  • Also beginning on or about June 12, and continuing until, but not including, the distribution date, it is expected that there will be two markets in Illumina common stock. Illumina shares that trade in the "regular way" market under the symbol "ILMN" will trade with an entitlement to shares of Grail common stock to be distributed pursuant to the distribution. Illumina shares that trade in the "ex-distribution" market under the symbol "ILMN WI" will trade without an entitlement to shares of Grail common stock.

  • Illumina shareholders who sell their shares in the "regular way" market before the distribution date, will also be selling their entitlement to receive Grail common shares in the distribution. Investors are encouraged to consult with their financial advisors regarding the specific implications of buying or selling Illumina common stock on or before the distribution date.

About the Author(s)

Amanda Pedersen

Amanda Pedersen is a veteran journalist and award-winning columnist with a passion for helping medical device professionals connect the dots between the medtech news of the day and the bigger picture. She has been covering the medtech industry since 2006.

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