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European Commission to Investigate Illumina for Closing Grail Deal

NEW YORK – The European Commission said on Friday that it is opening an investigation to assess whether Illumina's decision to close its acquisition of Grail this week constitutes a breach of the standstill obligation of European merger regulations.

"We deeply regret Illumina's decision to complete its acquisition of GRAIL, while our investigation into the transaction is still ongoing," Margrethe Vestager, executive VP in charge of competition policy, said in a statement. "Companies have to respect our competition rules and procedures. Under our ex-ante merger control regime companies must wait for our approval before a transaction can go ahead."

This so-called "standstill obligation" "is at the heart of our merger control system and we take its possible breaches very seriously," Vestager added. "This is why we have decided to immediately start an investigation to assess whether Illumina's decision constitutes a breach of this important obligation."

The new investigation will be separate from the ongoing Phase-II in-depth investigation into the substance of the case, the Commission said.

Illumina has said it does not believe the Commission has jurisdiction to regulate the deal and has challenged it in the European Union's General Court. The Commission is investigating based on new guidance that focuses on deals involving low or no revenues.

On Wednesday, Illumina announced that while it is now the sole shareholder of Grail, it will operate Grail as a separate company.

The Commission noted that it can impose fines of up to 10 percent of a company's total revenues, a possibility that Illumina noted Wednesday in a filing with the US Securities and Exchange Commission.

"We respect the process being run by the European Commission’s Directorate General of Competition," an Illumina spokesperson said in an email. "Our action, a combination of reacquiring Grail and holding the companies separate, is the only way to complete this life-saving acquisition prior to the deal expiring. We will abide by the outcome ultimately reached by the European legal process."

In Friday morning trading on the Nasdaq, shares of Illumina were up 3 percent at $485.01 after falling about 10 percent on Thursday.