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Illumina to Spin off Grail by Issuing Shares to Investors, Will Keep 14.5 Percent

NEW YORK – Illumina said Tuesday after the close of the market that it will be spinning off multi-cancer early detection firm Grail later this month by issuing shares to its existing stockholders. 

In a statement, the firm said its board of directors approved the spinoff, effective June 24. Illumina will issue one share of Grail to investors for every six shares of Illumina stock and will retain a 14.5 percent stake in Grail. Investors will not receive fractional shares of Grail, instead receiving prorated cash from the sale of aggregated fractional shares on the open market. 

In submissions to the US Securities and Exchange Commission, Grail said it will be an independent, publicly traded company and intends to list its shares on the Nasdaq under ticker symbol "GRAL." Grail said it expects to have approximately 551 stockholders of record and approximately 31.1 million shares of common stock outstanding, based on figures from April 26, 2024. 

"Today's announcement marks a milestone for Illumina and signals an important step forward for the company, since the divestiture of Grail is one of our 2024 priorities," Illumina CEO Jacob Thaysen said in a statement. "As we prepare to lead the next era of genomics innovation, we believe Grail will play an important role in advancing the industry and improving human health. … We also look forward to exploring opportunities where we can support Grail's work with industry-leading technologies and solutions." 

Grail estimated that its capitalization would be approximately $3.99 billion, or about half of what Illumina paid for it in 2021 when it closed the acquisition — first proposed in 2020 — despite scrutiny from US and European regulators. In 2023, both the US Federal Trade Commission and the European Commission ordered Illumina to divest grail.

In December 2023, Illumina said it would divest Grail following an unfavorable decision from the US Court of Appeals for the Fifth Circuit.

Divesting Grail was also the centerpiece of a heated campaign by activist investor Carl Icahn, which ousted former Illumina Board Chair John Thompson and precipitated the departure of longtime CEO Francis deSouza, both of whom championed the Grail acquisition.

Grail estimated that its total one-time transaction costs associated with the spinoff are approximately $20 million; for Illumina, $60 million to $75 million. 

As of March 31, Grail had cash and cash equivalents of $974.1 million; on a pro forma basis, that reflects "post-spinoff disposal funding" to be provided by Illumina. Actual cash and cash equivalents as of March 31 were $199.7 million. 

Illumina said it has received a private letter ruling from the IRS, "substantially to the effect that … the spinoff will qualify for non-recognition of gain and loss."

In after-hours trading on the Nasdaq, shares of Illumina were up more than 2 percent at $105.91.