Carl Icahn, who is waging a proxy fight with Illumina, is accusing the DNA-sequencing company of agreeing to provide an “unprecedented level” of additional personal liability insurance to its directors months after acquiring Grail in 2021, according to a new letter from the billionaire investor to Illumina shareholders.
The extra insurance was provided at the directors’ request and in addition to indemnification protections already paid for by Illumina, Icahn said in the letter contained in a Securities and Exchange Commission filing today.
“While clearly we do not possess a crystal ball, this smells strongly to us like a quid pro quo – a group of trepidatious directors were dragged reluctantly, kicking and screaming, by management into an extremely risky deal and ultimately conditioned their approval upon receiving an even thicker blanket of immunity than the extremely luxuriant comforter which they already possessed.”
“Until the directors are deposed, the owners of the company will never truly know what fears prompted them to demand the execution of this agreement as a condition to their acquiescence to management’s maniacal desire to punch antitrust regulators in the face,” he said.
Icahn accuses the company, which closed the deal over the objections of antitrust regulators, of the “destruction of $50 billion of shareholder value” as Illumina’s stock has declined since acquiring Grail. Earlier this month, the activist investor nominated three associates to Illumina’s board, saying he wants the company to end its efforts to keep Grail despite regulators’ objections.
“We intend to commence an immediate investigation into the massive value destruction caused by the reckless decision by Illumina’s board of directors to close the GRAIL acquisition over the objections of European antitrust regulators,” Icahn said in the letter.
U.S. and European regulators have said the merger could stifle innovation in the emerging market for blood-based early-cancer detection tests, and are considering their next steps.
Illumina has stated that it is working with regulators on a resolution for Grail, and if it loses its EU jurisdictional appeal, will follow the terms of the final divestiture order. The company said Icahn hasn’t offered any better solutions for satisfying regulators’ concerns about the acquisition.
In a response to Icahn’s new letter, Illumina said providing insurance to directors and officers is standard practice, and it is not uncommon for one business buying another to increase coverage during an acquisition. The company, in a press release, said it regularly informs shareholders of corporate risk factors, and “any suggestion otherwise is a mischaracterization of the facts.”
Reiterating its stance that the financier’s nominees lack relevant skills and experience for its board, Illumina said Icahn “has no ability to accelerate the legal and regulatory processes, and neither do his nominees.”
This story has been updated to include a comment from Illumina.