Dive Brief:
- The European Commission on Wednesday fined gene sequencing pioneer Illumina about €432 million ($480 million), the maximum penalty it could impose, for closing the 2021 acquisition of cancer test developer Grail without first gaining the commission’s approval.
- The commission found Illumina intentionally breached EU merger rules, which it called “an unprecedented and very serious infringement undermining the effective functioning of the EU merger control system.”
- Illumina, in an emailed statement, called the fine “unlawful” and “inappropriate,” and said it would appeal the decision.
Dive Insight:
Illumina announced in August 2021 that it had completed its proposed $8 billion acquisition of Grail, a month after the commission opened an investigation into the transaction.
In September 2022, the commission blocked the transaction over concerns that it would have significant anticompetitive effects, stifle innovation and reduce choice in the emerging market for blood-based early cancer detection tests.
EU regulations that require merging companies to receive the commission’s prior approval are “a cornerstone of the European merger control system” that allows the European Commission to protect the competitive landscape, the regulator said in a statement.
“Illumina strategically weighed up the risk of a gun-jumping fine against the risk of having to pay a high break-up fee if it failed to takeover GRAIL. It also considered the potential profits it could obtain by jumping the gun, even if it were ultimately forced to divest GRAIL,” the commission said.
It levied the maximum fine, equal to 10% of Illumina’s annual revenue, “with the aim of deterring such conduct,” the commission said.
Illumina said it would fight the fine.
“We closed the transaction in 2021 because there was no impediment to closing in the US, and the deal timeframe would have expired before the [European Commission] could reach a decision on the merits,” company spokesman David McAlpine said in an email.
Illumina’s separate challenge of the commission’s jurisdiction on the Grail deal is pending before the European Court of Justice. Success in that appeal would eliminate the basis for a fine, and a decision is expected in late 2023 or early 2024, McAlpine said.
The European Commission, in a symbolic move, also imposed a €1,000 ($1,112) fine on Grail, its first such penalty for a target company, after finding Grail took steps to complete the transaction while it knew the commission’s review was ongoing, it said.
Illumina’s purchase of Grail prompted a proxy fight led by activist investor Carl Icahn that forced the ouster of Chair John Thompson in May. CEO Francis deSouza stepped down from his post several weeks later.
Illumina is also appealing an order from the Federal Trade Commission to divest Grail.