The two US-based genetic research companies, Illumina Inc. (Illumina) and Pacific Biosciences of California Inc. (PacBio) jointly announced Thursday, December 2, 2019, that they have ‘mutually agreed’ to cancel $1.2 billion acquisition deal. The deal remained unresolved for more than one year since the agreement was decided between the two companies in November 2018. One main reason for the termination of the agreement was because of the opposition from the antitrust authorities.
US and UK Regulatory Opposing the Merger Deal
As decided in the proposed deal of November 2018, Illumina would pay a sum of nearly $1.2 billion in cash to PacBio for acquiring the latter company by the calculation of $8 per share. Moreover, the former company would have to pay a termination fee of $98 million and a continuation payment worth $34 million to PacBio over the next three months.
Following the acquisition deal announcement, the regulatory authorities including the UK Competition and Markets Authority (CMA) and the US Federal Trade Commission (FTC) have been investigating it. In June 2019, when Illumina showed its interest in completing the deal, the CMA started its second phase investigation which delayed the deal. Despite the uncertainty over the authorities’ decision, Illumina initialized its monthly cash payment to PacBio in September.
According to CMA’s findings over the investigation, the deal would provide Illumina unfair advantages in the competition of the UK genetic market. On December 17, 2019, the FTC filed a complaint urging the antitrust administrative to block the pending acquisition deal. The complaint alleged that Illumina was pursuing to maintain a monopoly of generic business in the US market.
After the FTC filed the complaint, Illumina expressed that it was likely to extend its deal till March 31, 2020. According to a filing with the US Securities and Exchange Commission, Illumina has agreed to make an advance payment as PacBio needed money to clear its debt which was more than $100 million.
Companies CEO’s Statements
Following the termination of the deal, the companies released a joint statement Thursday saying, “Considering the lengthy regulatory approval process the transaction has already been subject to and the continued uncertainty of the ultimate outcome, the parties decided that terminating the agreement.” The companies further added, “The termination is in the best interest of their respective shareholders and employees.”
Responding to a question, Illumina’s CEO, Francis deSouza said in a statement, “We believe this proposed combination would have broadened access to Pacific Biosciences sequencing technology, significantly expanded and accelerated innovation, and ultimately increased the clinical utility and impact of sequencing.” Meanwhile, Illumina’s CEO asserted, “I’d like to thank our employees, as well as the Pacific Biosciences team, for their unwavering dedication and commitment throughout this process.” deSouza continued, “Moving forward, we will continue to look for ways to increase the impact and benefit of sequencing technologies for researchers, clinicians, and most importantly, patients.”
PacBio’s CEO, Michael Hunkapiller also expressed, “We are disappointed that our customers and other stakeholders will not realize the powerful advantages of integrating the sequencing capabilities of our two companies.” Hunkapiller further added, “We are confident in the future of Pacific Biosciences as we continue to pursue improved sequencing accuracy and throughput that can be utilized in an ever-expanding number of applications.”
Gail Levine, deputy director of the FTC’s Bureau of Competition, said Thursday that the cancelation of the deal would ensure a more vibrant market. Levine stated, “This deal threatened to let a monopolist extinguish nascent competition in a growing health care market: next-generation DNA sequencing. Customers across the United States and the world will now continue to benefit from the independent innovative efforts of these companies to develop faster, better, and less expensive next-generation DNA sequencing technologies.”
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