Proxy battle erupts

Carl Icahn accused Illumina's board of ignoring shareholder questions and being evasive due to their reliance on big shareholders for protection.

Illumina is a biotechnology company that provides tools for genetic analysis. The company has faced regulatory challenges in the past, including a recent order by the Federal Trade Commission (FTC) to divest GRAIL, a cancer screening company that it acquired in 2020.

Icahn's accusations have sparked a proxy battle with the company. In particular, he has been taking aim at CEO Francis deSouza, whom he has accused of trying to influence the makeup of the board. Illumina has denied these allegations.

In his letter, Icahn provided three examples of obfuscation by the board. Firstly, he questioned the board's decision to acquire GRAIL despite antitrust regulator concerns in the US and Europe. When he asked management for an explanation, he claims that he was left with more questions than answers.

Icahn also raised concerns about the financial viability of the GRAIL acquisition. He questioned why the acquisition was pursued in the first place given that after the closing, GRAIL "would generate only $100M in revenue and lose $800M in operating income per year."

Secondly, Icahn accused the board of being evasive about deSouza's involvement in the makeup of the board. He claimed that deSouza had nominated directors, which the company denied.

Lastly, Icahn raised concerns about the board's demand for extra insurance coverage prior to the GRAIL acquisition. He claims that disclosure of this arrangement was delayed by several months.

It is important to note that the board has not responded to these allegations, and it is unclear what their perspective is. However, Icahn believes that these examples of obfuscation are "egregious" and that shareholders should vote against the incumbent board.

If he is successful in his proxy battle, Icahn hopes that the message sent here will "dispel the widely held belief that directors do not need to consider the views of shareholders when taking action." It remains to be seen how shareholders will vote and what the outcome of this proxy battle will be.