© Reuters. FILE PHOTO: Billionaire activist investor Carl Icahn gives an interview on the FOX Business Network's Neil Cavuto show in New York February 11, 2014. REUTERS/Brendan McDermid/File Photo
By Svea Herbst-Bayliss and David Carnevali
NEW YORK (Reuters) – Activist investor Carl Icahn has dropped a threat to present a new challenge to Illumina's (NASDAQ ) board, saving the U.S. genetic sequencing company from its second proxy race in as many years, according to people familiar with the matter.
Icahn, who installed one of his nominees on Illumina's board last year through a proxy contest, had said in December that he wanted to oust more Illumina directors, blaming them for the company losing three-quarters of its market value due to mismanagement and its sour $7.1. Billion-dollar acquisition of blood test maker Grail.
Icahn saw little value in a new proxy contest after Illumina moved to comply with antitrust rulings to get rid of Grail, the sources added.
The 88-year-old billionaire investor is moving forward with a lawsuit he filed against Illumina board directors last year, accusing them of breaching their fiduciary duty by completing the Grail acquisition in defiance of antitrust regulators.
The sources requested anonymity because Icahn's decision to drop out of a second proxy race has not been announced. Icahn and Illumina declined to comment.
Icahn had been preparing for a second proxy contest against Illumina for months, contacting potential board directors and seeking expert advice on whether Illumina shareholders would back him, the sources said.
Icahn garnered enough support from Illumina shareholders that one of the three nominees he put forward was elected a board director last year. Illumina CEO Francis deSouza was subsequently replaced by former Agilent Technologies (NYSE ) executive Jacob Thaysen, and in December, the company announced it planned to sell Grail.
Illumina founded Grail and spun it off in 2016. Grail raised funding from investors including Bill Gates and Jeff Bezos. Illumina kept a 12% share and decided in 2021 to acquire Grail to enter the early cancer detection market.
Antitrust regulators opposed the deal, fearing that Illumina would prevent Grail's rivals from accessing its technology to develop blood-based early cancer detection tests.
Illumina proceeded with the acquisition anyway, only to be fined a record 432 million euros ($466 million) by the European Commission and ordered to sell Grail.
Illumina has said it will divest Grail by selling it or spinning it off as an independent publicly traded company. The deal has taken its toll on Illumina, whose business is lucrative thanks to its ubiquitous DNA sequencing machines.
Grail's higher-than-expected expenses and delays in advancing its tests forced Illumina into writedowns that Icahn said totaled $4.7 billion.
Credit rating agency Fitch in December estimated Grail's annual operating losses at about $600 million. This is due to Grail's spending to advance its product portfolio and its bid to gain approval from health regulators for its Galleri test, which can detect more than 50 types of cancer through blood samples.