Carl C. Icahn letter to Illumina Inc
$ILMN
Dear Fellow Stockholders:
Our campaign at Illumina has had three main goals. We accomplished the first goal with the removal of prior Chairman John Thompson and CEO Francis deSouza. Our second goal was to encourage Illumina to divest GRAIL. Now, after a 75% decline in share price, or $55 billion in market value destruction,1 and years of expensive litigation across two continents with not a single victory to show for it, Illumina has finally decided to divest GRAIL. We hope that the GRAIL divestiture happens in a way that will truly open a path for Illumina to be successful again. We have major misgivings that as long as this current board remains in power, even if there is a divestiture, it will come with far too many strings attached. Why should stockholders trust the legacy conflicted directors with the GRAIL divesture process? Our third goal is to remove these legacy conflicted directors.
We believe that, without the influence of the legacy directors, CEO Jacob Thaysen, the new directors and Illumina’s employees will restore Illumina back to the great company it once was and can be again.
It would be a great mistake to allow the legacy conflicted directors to influence Illumina given their history of reckless decision making and value destruction. When we say conflicted, we mean that directors that are worried about personal liability for the billions of dollars they have cost the Company through their negligence cannot be trusted to make clear minded decisions. For example, they might want to pursue lengthy European appeals rather than negotiate a lesser fine. They might choose to spin off GRAIL and capitalize it with Illumina’s balance sheet rather than sell to a third party. They might choose to trade valuable commercial terms for personal indemnities. Why do Illumina’s stockholders need to be beholden to the legacy conflicted directors? Put simply, the fox should not guard the henhouse.
Stockholders should not forget the history of misdeeds and failed oversight by the legacy directors:
We believe the legacy conflicted directors broke the law – as evidenced by the €432 million maximum possible European Commission fine – by closing the GRAIL acquisition in the face of an explicit prohibition by EU regulators.
Illumina has already taken impairments totaling $4.7 billion for GRAIL. The impairments will likely continue to increase given the enormous sums invested in GRAIL, which already exceed $13 billion (considering the $9.7 billion initial purchase,3 $2.3 billion in already funded GAAP operating losses,4 $200 million in operating losses for each quarter prior to the separation,5 $453 million European Commission fine and TBD future capitalization in a spinoff scenario). In fact, a November 10, 2023 note by a UBS research analyst includes a ~$0 valuation for GRAIL. Several billionaires meaningfully profited from this transaction.
The legacy directors sat idly by as the core business deteriorated under prior CEO Francis deSouza.
The legacy conflicted directors decided to reward this value destruction and reckless decision making by compensating the prior CEO Francis deSouza $27 million in 2022 (and then jettisoned him without explanation days after the proxy contest ended).
Illumina’s 75% decline in share price since closing the GRAIL acquisition in no way compares to the performance of the Nasdaq Biotech Index, which declined only 20% over the same period.
If Illumina were a privately held company, there is little question that the legacy directors would have been fired years ago. If this were the army, the legacy directors would have been court-martialed.
During last year’s proxy contest, we asked many questions that the Company either failed to answer or obfuscated. The questions concerned, but were not limited to, (1) the Insurance Matters Agreement, (2) the various conflicts of interest arising from the GRAIL deal, (3) the justifications for closing the GRAIL deal in the face of explicit prohibition by EU regulators and (4) the suspiciously low tax basis of GRAIL. We have recently filed a lawsuit in the Delaware Chancery Court that, among other things, seeks to force disclosure of these key items prior to the upcoming annual meeting. We believe stockholders deserve to know the truth so they can make a fully informed decision on who can restore Illumina back to the great company it once was and can be again.
Sincerely,
Carl C. Icahn
Source:
https://www.sec.gov/Archives/edgar/data/921669/000153949723002194/exh_1.htm