Credit: Grail

Sequencing and array technologies giant Illumina yesterday urged its shareholders, in a preliminary proxy statement filed with the SEC, to vote for the company’s board of directors and to withhold voting for the three director nominees put forward by activist investor Carl Icahn. In response, Icahn issued his own statement alleging that that company—and its CEO Francis deSouza—broke a commitment to keep private the details of settlement talks held by the two parties in recent weeks.

The proxy fight started earlier in March when Icahn released a public letter to Illumina shareholders declaring his intent to nominate three people to the company’s board of directors with the intention of solving regulatory issues the company has encountered over its 2021 $7.1 billion acquisition of Grail. Icahn contended that by forging ahead with the acquisition before gaining regulatory clearance—an action Icahn claimed was “reckless”—Illumina had cost shareholders $50 billion.

On March 13, Illumina issued a press release stating that “Icahn’s letter neither recognizes the real value that Grail can provide to Illumina’s shareholders, nor reflects an understanding of the regulatory process” and noted that the company is already working on executing a divestiture of Grail in anticipation of the European Commission’s divestiture order.

About ten days later, Icahn turned up the heat in the proxy fight via second letter to Illumina shareholders which termed the Grail acquisition, completed in the face of opposition from U.S. and European antitrust regulators, as “a new low in corporate governance.” Icahn contends that the company’s board members were hesitant over the Grail acquisition pointing to additional personal liability insurance provided to them before the deal was agreed.

In that letter Icahn said “this smells strongly to us like a quid pro quo—a group of trepidatious directors were dragged reluctantly, kicking and screaming, by management into an extremely risky deal and ultimately conditioned their approval upon receiving an even thicker blanket of immunity than the extremely luxuriant comforter which they already possessed.”

Illumina responded that there is nothing amiss about the additional coverage provided to its directors. “The board takes its fiduciary duties seriously and exercises considered and deliberate judgement with independent advice. Illumina steadfastly follows appropriate risk management and disclosure practices.”

In the latest flare up yesterday, Illumina contends that Icahn and his slate of nominees—Jesse Lynn, Andrew Teno, or Vincent Intrieri—do not “understand Illumina’s business or Grail and the associated regulatory processes.”

Illumina said it came to this conclusion after its Nominating/Corporate Governance Committee met with each of the three Icahn nominees “in the spirit of continuing to explore a resolution to the situation.”

In his escalation of the proxy fight, Icahn, who holds only 1.4% of Illumina stock, has directly targeted CEO deSouza who Icahn contends hold undue sway over the actions of the board. “The problem is that Mr. deSouza has been able to manipulate his board such that we believe all but one of his board members are handpicked by Mr. deSouza at this time,” Icahn shot back in his letter yesterday.

The Illumina annual meeting will be held in late May. In the interim, Illumina is urging its shareholders to await the final proxy statement and to vote for all nine of the company’s current director nominees.

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