European Union merger officials are set to issue a fine against Illumina Inc. on Wednesday for closing its deal with cancer-test provider Grail Inc. without securing regulatory approval first, according to people familiar with the matter.
The fine could amount to 4% of its revenue, said one of the people, though it could also be higher. The company has already put aside $453 million to cover a potential maximum fine of 10% of its annual revenue.
An EU order for the Illumina to divest the deal won’t come until later in the year, said the people, who asked not to be named discussing confidential matters.
The EU issued the companies, which are both US-based, details of the violations last year. The commission called Illumina’s takeover of Grail while the transaction was still under review “a serious breach” and warned that it considered the closing “a very serious infringement” that could lead to “hefty fines.”
An Illumina spokesperson said that the company would appeal the forthcoming fine.
“We disagree that the commission has jurisdiction to review the Grail transaction as well as with the premise of the commission imposing a fine,” an Illumina spokesperson said in a statement. The merger is “pro-competitive and in the best interests of patients in Europe and worldwide,” the statement said.
The European Commission declined to comment on whether the fine would be issued Wednesday.
Illumina, which is challenging an EU merger veto for the deal in the bloc’s courts, has said the commission had no jurisdiction over the transaction, which is between two American companies with no foreseeable impact on competition in Europe.
The deal marked the first time that the EU imposed interim measures on companies for jumping the gun on a merger. It’s also the first time the commission used new powers, adopted in 2021, to pick up takeovers of startups with little or no revenue that previously slipped under the antitrust radar despite posing a risk to competition.
Illumina has several challenges pending in the EU’s courts, including one at the bloc’s top court which could set the course for the commission to continue using the new powers it tested out in this case.
The commission had already laid out a roadmap in December for the firms to unwind the takeover “swiftly” to get back to a pre-transaction situation.
US antitrust authorities in April told the companies to divest, a decision Illumina is also appealing.
Illumina’s board last month accepted the resignation of Chief Executive Officer Francis deSouza, handing a victory to activist investor Carl Icahn who had been seeking his removal. Icahn had said Illumina had hit a “new low” in continuing to pursue a deal opposed by antitrust regulators.
Author: Samuel Stolton, Angelica Peebles and Stephanie Bodoni