The gene sequencing machine maker Illumina (NASDAQ:ILMN) announced that its Board of Directors approved the spin-off of GRAIL. The separation is set to occur on June 24, 2024, with GRAIL trading independently on NASDAQ under the symbol GRAL. Following the announcement, Illumina stock gained 1.3% in after-hours trading.
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After the spin-off, Illumina will retain a minority stake of 14.5% in GRAIL, and existing Illumina shareholders will maintain their current holdings of Illumina stock. They will also receive one share of GRAIL for every six shares of Illumina stock held as of the record date, June 13, 2024.
Illumina Grail Deal Faced Regulatory Challenges
Illumina founded GRAIL and subsequently spun it off in 2016. However, in 2021, Illumina re-acquired GRAIL for a hefty $7.1 billion. The company’s strategy was to plunge into the early cancer detection space, wielding GRAIL’s Galleri blood test, renowned for its ability to identify 50 different cancers before they show symptoms.
However, this reunion faced opposition from antitrust regulators in Europe. Worries emerged that Illumina’s dominance might prevent competitors from tapping into its technology to craft similar blood-based cancer detection tools.
In July 2023, the European Commission fined Illumina and GRAIL about €432 million and €1,000, respectively, for implementing their proposed merger without the Commission’s consent, which is a breach of EU merger control rules.
Carl Icahn and Illumina Proxy Fight
While Illumina faced regulatory headwinds, activist investor Carl Icahn entered into a proxy fight with the company’s board. Icahn blamed the company’s acquisition of GRAIL for its stock’s underperformance.
It’s worth highlighting that Illumina’s shares have been down about 51% in one year, significantly underperforming the broader equity markets.
Is Illumina Stock a Buy?
Wall Street is cautiously optimistic about Illumina stock. It has eight Buy, six Hold, and three Sell recommendations for a Moderate Buy consensus rating. Analysts’ average price target on ILMN stock is $150.14, which implies 45.25% upside potential from current levels.
