Illumina wins court battle with EU over $7 billion Grail takeover

By Samuel Stolton

Illumina Inc.’s blocked $7 billion bid for cancer-detection provider Grail Inc. should never have been probed by the European Union, according to a top court ruling that strikes at the heart of the EU’s attempt to vet more global deals.
 

The European Commission overstepped its authority when it used the US takeover as a test for new powers to examine mergers that would previously have flown under its radar, judges at the EU’s Court of Justice in Luxembourg said on Tuesday. 
 

Illumina said in a statement that the EU court confirmed that the commission “exceeded its authority by asserting jurisdiction over this merger.” It also said it would no longer have to pay a €432 million ($477 million) fine for closing the deal before EU regulators had scrutinized it. The biotech firm’s shares rose as much as 1.3% in New York trading.
 

While Illumina eventually agreed to unwind the acquisition last year amid antitrust opposition on both sides of the Atlantic, the ruling is likely to be pivotal for the EU’s approach to regulating scores of other tie-ups in the years to come.
 

At issue in the case are key changes to EU merger review processes in 2021 to pick up takeovers of low- or zero-revenue targets that previously escaped a proper review — a source of deep frustration particularly over Big Tech’s appetite for snapping up fledgling rivals. 
 

Under the controversial system, the Brussels-based commission encouraged national regulators to ask it to probe deals that would normally fall below the threshold for EU investigations.
 

But judges said such probes are “not authorized” for mergers lacking a European dimension where agencies “are not competent to examine those proposed concentrations under their own national law.” 
 

The Illumina-Grail transaction had originally fallen on the EU’s desks after requests from France, Belgium, Greece, Iceland, the Netherlands, and Norway.
 

Margrethe Vestager, the EU’s competition commissioner, warned after the ruling that smaller companies should still “be protected against the risk of elimination” from larger predators. 
 

“We will consider the next steps to ensure that the commission is able to review those few cases where a deal would have an impact in Europe but does not otherwise meet the EU notification thresholds,” she said in a statement. 
 

Recently, the EU’s new powers have been used to thwart deals such as Qualcomm Inc.’s purchase of Israeli chipmaker Autotalks and a Deutsche Boerse AG unit’s buyout of Nasdaq Inc.’s European power trading business.
 

Grail was spun off from DNA sequencing giant Illumina in 2016 to develop a blood test to detect 50 types of early stages of cancer. San Diego-based Illumina sought to buy back the startup and provoked authorities by closing the acquisition in August 2021 despite pending investigations. 
 

Armed with its new powers, the EU’s antitrust arm decided to examine the deal’s potential impact on the industry — even though the combination would initially have no footprint in Europe.
 

That kicked off a spate of legal challenges before regulators eventually issued a veto in September 2022, citing the risk to innovation and choice.
 

Several other EU court appeals from Illumina against commission decisions will now likely be thrown out following Tuesday’s ruling. Aside from contesting its fine for closing the deal too soon, the firm had also challenged the commission’s formal block and formal divestment order. 
 

The cases are: C-611/22 P Illumina v. Commission, C-625/22 P Grail v. Commission.
 

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