Illumina chair kicked out in a proxy battle with Carl Icahn

Illumina shareholders voted to remove company chairman John Thompson and approve a nominee backed by Carl Icahn after a proxy battle led by the veteran activist investor.

Andrew Tino, Icahn’s nominee for a seat on the board of the world’s largest gene-sequencing company, won the shareholder vote at the company’s annual meeting on Thursday, while Thompson was fired.

However, two other Icahn candidates failed to attract enough votes to win seats on the board, paving the way for the re-election of Illumina CEO Francis de Souza and director Robert Epstein.

“We value shareholder constructive feedback throughout this process and are committed to implementing our plan to accelerate shareholder value creation,” Illumina said in a statement.

Illumina shares fell about 11 percent to $189.71 after the vote, the lowest this year.

“I see this as just the first round in an ongoing battle,” said John Coffey, a professor at Columbia Law School. “Shareholders may be able to remove the CEO. But shareholders were clearly concerned about giving Icahn even three seats on the board.”

In another sign of investor frustration with the company, Illumina said shareholders refused 2022 salaries to its top executives. DeSouza was awarded $26.7 million in gross pay in 2022, nearly double the amount the previous year. Payment proposals are not binding in the US, but big companies rarely lose those votes.

The vote to oust Thompson, the former Microsoft president and CEO, follows a campaign by Icahn that focused on Illumina’s “reckless decision” to close its $8 billion acquisition of cancer testing developer Grail in 2021 against the wishes of EU and US antitrust regulators. .

Icahn, who owns a 1.4 percent stake in Illumina, said it was “inexplicable and inexcusable” that the Thompson-led board went ahead with the deal without being certain whether it would get clearance from EU regulators. In December, Brussels ordered Illumina to get rid of Grail and plans to issue a fine of up to $453 million for “jumping the gun.”

The US Federal Trade Commission has also ordered Illumina to recall Grail. Illumina is appealing against orders from EU and US regulators.

The 87-year-old investor also alleged that the board of directors lacked independence and that most of the directors were hand-picked by de Souza.

Illumina’s market cap has fallen from $75 billion in August 2021, when it bought Grail, to less than $30 billion on Wednesday.

The Illumina proxy battle represents one of the largest shareholder activity campaigns in recent years. Since 2012, only seven US vote-off battles have entered companies with a market capitalization of more than $30 billion, according to analytics firm Insightia. Activist campaigns at Disney and Salesforce settled this year before any shareholder voted.

One shareholder, who was not authorized to speak publicly, told the Financial Times that he had voted to replace Thompson because the Grail deal did not work out and the board remained “silent” on shareholders.

“They don’t seem to be acknowledging their mistake, and the vote gave them an opportunity to send a powerful message,” said the contributor.

Illumina’s vote was also a test case for the SEC’s shareholder voting rules that Icahn and other activists had fought for, giving shareholders the flexibility to pick and choose nominees.

Previously, shareholders had to vote for either an entire group of company candidates or activists in a contested election. Now, contributors can choose to support individual candidates from both camps. Only a handful of activist competitors have been voted in with the new “public” voting rules, and all of them are in small businesses.

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