Illumina (NSDQ:ILMN) announced today that it entered into an agreement to acquire Grail for cash and stock consideration of $8 billion.
Last week, it was reported that Illumina was looking to purchase the cancer detection startup that spun out from the company four years ago and the companies confirmed that to be true today.
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, which is set to commercially launch next year.
Under the agreement, Grail stockholders will receive total consideration of $8 billion, with $3.5 billion coming in cash and $4.5 billion in the form of shares of Illumina common stock, subject to a collar. Illumina currently holds 14.5% of Grail’s outstanding shares and approximately 12% on a fully diluted basis, according to a news release.
The collar on the stock consideration ensures Grail stockholders excluding Illumina will receive Illumina shares equal to approximately $4 billion in value. Upon the closing of the transaction, which is expected in the second half of 2021, current Illumina stockholders are expected to own approximately 93% of the combined company, while Grail stockholders make up the remaining 7%.
Cash from the balance sheets of both Illumina and Grail is earmarked for the cash consideration to Grail stockholders, plus up to $1 billion in capital raised through either debt or equity issuance. Illumina obtained financing commitments for a $1 billion bridge facility with Goldman Sachs.
Grail stockholders will also receive contingent value rights that entitle holders to receive future payments representing a pro rata portion of certain Grail-related revenues each year over a 12-year period. Illumina expects the transaction to be accretive to the company starting in 2021, accelerating revenue growth over time.
“Over the last four years, Grail’s talented team has made exceptional progress in developing the technology and clinical data required to launch the Galleri multi-cancer screening test,” Illumina president & CEO Francis deSouza said in the release. “Galleri is among the most promising new tools in the fight against cancer, and we are thrilled to welcome GRAIL back to Illumina to help transform cancer care using genomics and our NGS platform. Together, we have an important opportunity to introduce routine and broadly available blood-based screening that enables early cancer detection when treatment can be more effective and less costly.
“Multi-cancer early detection is better for patients, their physicians, and payors. As we accelerate our path to clinical leadership and the path to multi-cancer early detection, we will continue to drive significant value creation for our stockholders.”
