Illumina Chairman Removed in Proxy Battle with Carl Icahn
Illumina, the world’s largest gene sequencing company, has witnessed a significant shakeup in its leadership following a proxy battle led by veteran activist investor Carl Icahn. Shareholders voted to oust John Thompson, the company’s Chairman, and approved the nomination of Andrew Teno, a nominee supported by Icahn. Teno secured a board seat during the company’s annual meeting, while Thompson was removed from his position.
However, two other Icahn-backed nominees failed to gather enough votes to secure board seats. As a result, Illumina’s Chief Executive Officer, Francis deSouza, and director Robert Epstein were re-elected to their positions.
The shareholder vote had an immediate impact on Illumina’s stock price, which plummeted by nearly 11% to $189.71, marking its lowest level this year. This sharp decline suggested that investors may have been anticipating more significant changes within the embattled genome sequencing leader.
In addition to the leadership shakeup, shareholders also rejected Illumina’s proposed executive pay for senior executives in 2022. This rejection indicates investor dissatisfaction with executive compensation practices at the company. While these pay proposals are non-binding in the United States, it is uncommon for major companies to face such rejections from shareholders.
Icahn’s campaign against Illumina centred on the company’s decision to proceed with its $8 billion acquisition of cancer test developer Grail in 2021, despite objections from antitrust regulators in the European Union (EU) and the United States. Icahn criticised the board, led by Thompson, for proceeding with the deal without ensuring regulatory clearance from the EU. The EU subsequently ordered Illumina to divest Grail and is planning to issue a fine of up to $453 million for violating antitrust regulations.
Notably, Illumina’s market capitalization has experienced a significant decline, dropping from $75 billion in August 2021 when the Grail acquisition was completed to less than $30 billion as of Wednesday.
The proxy battle at Illumina is regarded as one of the most prominent shareholder activism campaigns in recent years. The outcome of the vote, however, leaves investors uncertain about the company’s future direction and its divestiture plans for Grail.
The shareholder vote also serves as a test case for the “universal” voting rules adopted by the US Securities and Exchange Commission (SEC) that Icahn and other activists advocated for. These rules allow shareholders the flexibility to select nominees from both the company’s slate and activist investors, departing from the previous requirement to vote for one slate or the other. So far, only a few activist contests using these new voting rules have gone to a vote, all of which involved smaller companies.
