Activist Icahn prepares a second board challenge at Illumina -letter

By Svea Herbst-Bayliss

(Reuters) -Activist investor Carl Icahn said on Monday that he plans to oust directors at Illumina (NASDAQ:), laying the groundwork for a second board challenge at the gene-sequencing company months after shareholders elected one of his director candidates.

Icahn disclosed his plans without offering details in a letter to other shareholders less than 24 hours after Illumina said it will divest blood test maker Grail.

The billionaire investor had long been critical of Illumina’s $7 billion Grail acquisition and made it a centrepiece of his previous proxy fight in which Andrew Teno, a portfolio manager working for Icahn, won a seat on the 11-member board.

In Monday’s letter, Icahn blamed the Grail acquisition, which has faced regulatory challenges since 2021, for a 75% drop in Illumina’s share price that he says wiped away $55 billion in value for shareholders. The stock was up more than 2% at $130.39 on Monday.

In October Icahn sued the board, accusing directors of breaching their fiduciary duties.

Icahn cheered the company’s decision to divest Grail, but said the job at Illumina has not been fully completed.

“Our third goal is to remove these legacy conflicted directors,” Icahn wrote in a letter that was made public in a regulatory filing. His first two goals were to push out former CEO Francis deSouza, who resigned in June, and get Illumina to divest Grail, the letter said.

Illumina declined to comment.

Illumina’s legacy directors cannot be trusted to oversee the disposal of Grail, Icahn wrote. “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.”

While Icahn has not revealed details about his plans, people familiar with his thinking note that only four directors – Scott Ullem, Teno, Stephen MacMillan and the company’s new CEO Jacob Thaysen – played no role in recent decisions.

This would suggest that Icahn, one of the industry’s most feared activists, could target as many as seven directors, including a Nobel Prize winner and a former U.S. Food and Drug Administration Commissioner, for removal.

A spokesman for Icahn declined to comment beyond the contents of the letter.

Over the last months, the investor base has changed some at Illumina with more hedge funds increasing their holdings, regulatory filings show.

Activist ValueAct, for example, listed Illumina as a new stake in its most recent 13-F regulatory filing. A greater concentration of hedge fund investors is often seen as a positive sign for a potential proxy contest as they are generally seen as ready to back a dissident investor’s push for changes.

(With additional reporting by Khushi Mandowara in Bengaluru; Editing by Andrea Ricci and Bill Berkrot)