The European Commission announced that it opened an investigation to assess Illumina’s (NSDQ:ILMN) recently completed acquisition of Grail.
Last week, Illumina completed its long-awaited, highly-scrutinized acquisition of the cancer detection company that spun out from Illumina nearly five years ago. The $8 billion acquisition was initially announced in September 2020.
Within the announcement of the transaction’s completion, San Diego-based Illumina said that it will hold Grail as a separate company as the European Commission conducts an ongoing regulatory review. A decision from the EU regulators is anticipated after the deal expires, but Illumina has said Grail has no business in Europe, which leads company officials to believe the review is out of the European Commission’s jurisdiction.
A day after the announcement of the acquisition’s completion, the European Commission said in a news release that it would open an investigation to assess whether the decision taken by Illumina to complete the acquisition while the commission’s investigation was still ongoing constitutes a breach of the “standstill obligation” under Article 7 of the Merger Regulation.
The standstill obligation “prevents the potentially irreparable negative impact of transactions on the market,” pending the outcome of the coming investigation, which is separate from the one it was conducting at the time of the announcement of the merger’s completion.
“We deeply regret Illumina’s decision to complete its acquisition of GRAIL, while our investigation into the transaction is still ongoing,” European Commission EVP Margrethe Vestager, who is in charge of competition policy, said in the release. “Companies have to respect our competition rules and procedures. Under our ex-ante merger control, regime companies must wait for our approval before a transaction can go ahead. This obligation, that we call standstill obligation, is at the heart of our merger control system and we take its possible breaches very seriously. This is why we have decided to immediately start an investigation to assess whether Illumina’s decision constitutes a breach of this important obligation.”
Grail was founded in 2016 and spun out as a standalone company powered by Illumina’s NGS technology for developing data science and machine learning for enabling multiple cancers in early detection tests. It raised approximately $2 billion to support its platform and develop the Galleri multi-cancer screening test.
Last year’s announcement of the merger was met with scrutiny, after which Illumina and Grail agreed this past spring to postpone the planned purchase until after Sept. 20 while the FTC challenged the deal in the U.S.. The company in March stated that it disagreed with and will oppose the FTC’s challenge to the acquisition. A U.S. judge ruled in favor of an FTC petition to drop its case against the merger without prejudice — a move that allowed the EU to continue investigating the merger.
