Illumina jumps 20% as Carl Icahn starts proxy battle over Grail deal (update)

Update 2:15pm: Adds Illumina comment.

Carl Icahn plans to nominate three directors for Illumina's (NASDAQ:ILMN) board, arguing that the biotech firm has been continuing its planned purchase of Grail Inc. even as regulators attempt to block it. Illumina (ILMN) jumped 20% in trading on Monday.

The billionaire activist, who tried to reach a deal with Illumina (ILMN) to avoid a proxy fight, plans to nominate Vincent Intrieri, founder and CEO of an investment fund and two of Icahn’s deputies, Jesse Lynn and Andrew Teno, according to a letter Icahn sent to Illumina's board on Monday.

Icahn is said to claim that Illumina (ILMN), the gene-sequencing company, is vastly overpaying for Grail and went through with its acquisition even as it didn't know if European regulators would approve it. Icahn highlighted that Illumina has to pay $800 million in operating costs, but has no control Grail and can't realize any synergies from the purchase.

"Banks today are making it difficult generally for companies without very strong balance sheets to borrow," Icahn said in the letter. "But in the case of Illumina, which is now caught in quicksand, we believe it will be almost impossible to raise the capital needed. We feel strongly that our three highly qualified nominees are particularly suited because of their experience to help keep Illumina from sinking further into the quicksand."

Illumina responded to Icahn's letter and said it had multiple conversations with the activist, though he was "explicit and unyielding" in his demand that "any resolution should give him outsized influence and control."

"The Board has determined Icahn's nominees lack relevant skills and experience, and that it is not in the best interests of shareholders to appoint Mr. Icahn's three nominees to the Board of Illumina," Illumina said in a statement.

In December, the European Commission ordered Illumina (ILMN) to divest Grail three months after an EU veto of the $7.1B acquisition on antitrust grounds and concerns about the impact on innovation.

"Icahn's letter neither recognizes the real value that GRAIL can provide to Illumina's shareholders, nor reflects an understanding of the regulatory process," Illumina (ILMN) added in its statement. "Illumina is moving as quickly as possible to arrive at a resolution, with divestiture work already underway in advance of the European Commission's divestiture order.

News of the Icahn letter was reported by the WSJ on Sunday.

Illumina (ILMN) last month sought to persuade senior EU and national antitrust officials at a closed hearing against an order to divest its 2021 acquisition of cancer test maker GRAIL.