Illumina to Appeal $476 Million EU Fine for Closing Grail Acquisition Early

“If companies merge before our clearance, they breach our rules.
Illumina
and Grail knowingly and deliberately did so by implementing their tie-up as we were still investigating. Today’s decision to fine both companies, for a total amount of €432 million, shows that this is a very serious infringement,” said Margrethe Vestager, the EU’s antitrust commissioner.

The commission’s announcement said it had evidence that Illumina and Grail strategically decided to “jump the gun” and close their merger before Europe had completed its antitrust review. The companies decided the cost of a potential fine was outweighed by the breakup fee Illumina would owe for backing out of the merger and the profits from owning Grail, said the commission.

As a deterrent, commission officials said they initially calculated a fine close to €530 million ($570 million). But EU rules limit fines to 10% of a company’s annual revenue. Using Illumina’s 2022 results, and that year’s average exchange rate, the fine came to €432 million.

An Illumina spokesperson told Barron’s the company planned to appeal the decision.

“We believe that the fine announced by the European Commission today—while expected and accrued for over the last year—is unlawful, inappropriate and disproportionate,” the spokesperson said, adding that Illumina closed the transaction early because there was “no impediment to closing in the U.S. and the deal time frame would have expired before the EC could reach a decision on the merits.”

Illumina has noted that Grail does no business in Europe, so it has disputed the commission’s antitrust jurisdiction over the Grail merger. After an EU trial court upheld the EC’s jurisdiction, Illumina is pursing an appeal that it hopes will yield an opposite finding and refund the fine. In a separate appeal, Illumina is disputing the commission’s order to unwind the merger.

Illumina is filing a similar appeal in the U.S. against the Federal Trade Commission’s order to undo the Grail deal. U.S. courts have handed the FTC some recent defeats, but Illumina investors have themselves been unhappy with Grail’s steep start-up losses. The Illumina chief executive who championed the merger, Francis deSouza, resigned this year, after sharp drops in the company’s stock price and a proxy fight by investor Carl Icahn.

Shares of Illumina were rising 2.9% to $190.21 on Wednesday.

Write to Angela Palumbo at [email protected]