"BRUSSELS -- The European Union blocked Illumina Inc.'s acquisition of cancer-test developer Grail Inc., putting a $7.1 billion merger into jeopardy days after a U.S. administrative-law judge allowed it to go forward.
The fate of the acquisition has emerged as an early test case for regulators in the U.S. and EU who have vowed to scrutinize mergers more closely.
The outcome could establish new precedents for mergers-and-acquisition oversight, antitrust lawyers said, especially since Grail's tests are relatively new and generated little revenue so far -- and none in the EU.
The EU's antitrust regulator said on Tuesday that Illumina's purchase would stifle innovation and reduce choice in an emerging market for early cancer-detection blood tests. The decision could prompt Illumina, a maker of gene-sequencing machines, to shed Grail just over a year after scooping it up.
The EU's antitrust regulator said Illumina didn't offer sufficient remedies to address its concerns about the deal and that it would issue a separate decision ordering Illumina and Grail to dissolve their transaction.
"It is vital to preserve competition between early cancer-detection-test developers at this critical stage of development," said Margrethe Vestager, the EU's competition czar.
The action is a significant intervention by the European competition authority in a case that involves a U.S. company -- Grail -- with no current revenue inside the bloc.
In this case, the European Commission and FTC staff have indicated they hold similar positions opposing the combination, though the administrative-law judge in the U.S. ruled in support of Illumina.
The bloc's move isn't an unprecedented divergence between the two economies, but it is unusual, especially since it involves a company without EU revenue, antitrust lawyers said. And the action shows the potential for the EU to influence business deals worldwide and potentially even when regulators elsewhere have no issues with a merger.
"The fact that the EU has done this I think will open eyes wide to parties looking to purchase or buy sellers who don't have any revenue," said Jeffrey Jacobovitz, a former FTC antitrust attorney and the chair of the antitrust group at Arnall Golden Gregory LLP.
He said it wasn't unusual for the EU, which is known to aggressively pursue antitrust enforcement, to weigh in on a transaction involving two U.S. companies so long as it has jurisdiction.
The U.S. Chamber of Commerce objected to the bloc's intervention in a deal for a company without revenue in the region.
"It's a dangerous precedent to suggest a deal should be blocked without a recognizable local nexus," said Sean Heather, the chamber's senior vice president for international regulatory affairs and antitrust. "Not only does it ignore previously agreed international best practice, but it drives uncertainty around merger clearance to new heights."
The resolution of Illumina's purchase of Grail is still in question. Illumina said it plans to appeal the EU's decision, while the U.S. Federal Trade Commission has challenged the administrative-law judge's ruling in support of the deal.
The company said it continued to believe the merger was pro-competitive and that it would accelerate innovation. It said, however, that it would begin reviewing strategic alternatives for Grail in the event it isn't able to delay an expected EU divestment order while it appeals. Alternatives could include separating Grail back into a stand-alone company.
"Illumina can make Grail's lifesaving, multicancer early detection test more available, more affordable, and more accessible -- saving lives and lowering healthcare costs," said Charles Dadswell, Illumina's general counsel.
Antitrust lawyers, however, said the European Commission's decision is likely to quash the deal. Even if Illumina wins an appeal in the case, the lawyers said, the commission could appeal the win and block the deal for years, which Illumina might not want to endure.
"Usually when mergers are blocked, they are dead," said Salome Cisnal de Ugarte, a partner with King & Spalding LLP. She said there is always hope for an appeal, "but even if the parties decide to go to court it will take time and by then they might not be interested anymore."
Grail's technology promises to help doctors and people diagnose cancer earlier than it has been by detecting it in the blood, a longtime goal but one that has proven technically difficult to accomplish.
San Diego-based Illumina, which makes and sells genetic-sequencing machines and the chemicals those machines use, founded Grail and spun off a majority of the business in 2017, retaining a minority stake. Then in 2020, Illumina agreed to acquire the part of Grail it didn't already own and completed the acquisition in 2021, despite pending legal challenges.
The EU's competition regulator opened a probe last year into whether the completion of the acquisition breached a requirement for companies to put mergers on hold while the regulator investigates competition concerns. The fine for breaking that rule can reach as much as 10% of a company's revenue. Illumina said there was no legal impediment to closing the transaction. It said it would keep Grail as a separate unit and abide by whatever competition authorities decide.
The European Commission said Illumina is the only suitable supplier of the genetic-sequencing systems that are used by Grail and its rivals.
Illumina's acquisition of Grail meant the company would compete directly in the development of early cancer-detection tests, the regulator said.
"This would stifle the ongoing innovation race between Grail and its rivals and ultimately lead to less innovation, less choice and higher prices for European citizens and for our healthcare systems," Ms. Vestager said.” [1]
1. EU Flexes Its Power, Blocks U.S. Merger
Kim Mackrael; Loftus, Peter.
Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]. 07 Sep 2022: A.1.
Komentarų nėra:
Rašyti komentarą