June 11 (Reuters) – Francis deSouza, CEO of Illumina (ILMN.O), stepped down on Sunday. This marked a victory for activist investor Carl Icahn and raised expectations that it could reverse its controversial $7.1 billion acquisition of Grail (GRAL.O).
The maker of the gene-sequencing machine had bought back Grail, a maker of diagnostic cancer tests, in 2021 despite opposition from U.S. and European antitrust regulators — a decision that led Icahn to pursue a proxy fight with Illumina, arguing that it had to be divested because it had cost investors billions of dollars.
Illumina said Sunday that the board had accepted deSouza’s resignation. It has begun the search for a new CEO and named Charles Dadswell, senior vice president and general counsel, as interim chief executive. DeSouza will stay on as an advisor until July 31.
Shares of Illumina rose 2.2% on Monday to $204.98 in premarket trading. The company’s shares have lost about 60% of their value since the completion of the Grail deal in 2021.
The Grail deal “has kept a lot of investors out of the stock,” said TD Cowen analyst Dan Brennan. “With Francis stepping aside now, I think the certainty of a Grail exit is definitely increasing.”
Icahn said in a tweet that he is happy with the recent changes at Illumina and considers them a “very positive event.”
“The new board members, the CEO transition and the change of chairman are important positives that should generate value for all stakeholders and human health,” he added.
The proxy battle began in March and ended with a vote in May, with Icahn winning enough shareholder support to oust the board chairman, John Thompson, and install his nominee, Andrew Teno. Icahn has said he wants former Illumina CEO Jay Flatley to return.
DeSouza said in a letter to employees on LinkedIn, “My belief in the potential of GRAIL’s potentially life-saving technology and the benefits of merging it with Illumina remains unwavering.”
DeSouza’s departure was not a foregone conclusion. He had more than twice as many shareholder votes as his proxy challenger, which could have given him enough legitimacy to persevere.
For example, Vicki Hollub remains the CEO of Occidental Petroleum (OXY.N) after the company closed a board seat deal with Icahn in 2020 and after Icahn paid out two years later.
Yet there is a history of departing CEOs. Unilever Plc (ULVR.L) CEO Alan Jope announced plans to leave three months after Nelson Peltz of hedge fund Trian Fund Management joined the consumer giant’s board last year.
Illumina earlier this month appealed a U.S. Federal Trade Commission order requiring Grail to divest due to competition concerns.
Reporting by Lavanya Ahire in Bengaluru and Caroline Humer in New York; Additional reporting by Michael Erman in New Jersey, Anirban Sen in New York and Manas Mishra in Bengaluru; Edited by Mark Porter, Marguerita Choy and Edwina Gibbs