Illumina to acquire GRAIL for $8B in cash, stock consideration
Illumina (ILMN) announced they have entered into a definitive agreement under which Illumina will acquire GRAIL for cash and stock consideration of $8B upon closing of the transaction. In addition, GRAIL stockholders will receive future payments representing a tiered single digit percentage of certain GRAIL-related revenues.
The agreement has been approved by the boards of Illumina and GRAIL.
GRAIL was founded by Illumina in 2016 and was spun out as a standalone company, powered by Illumina’s NGS technology, to develop data science and machine learning and create the atlas of cancer signals in the blood, enabling multi-cancer early detection tests.
GRAIL raised approximately $2B to support its technology platform and develop Galleri.
An earlier version of Galleri was able to detect more than 50 cancer types, over 45 of which have no recommended screening in the United States.
Galleri is expected to launch commercially in 2021 as a multi-cancer, laboratory developed test for early cancer detection from blood.
GRAIL plans to follow Galleri with future blood-based tests for cancer diagnosis, detection and post-treatment monitoring of cancer patients.
Under the terms of the agreement, at closing, GRAIL stockholders will receive total consideration of $8B, consisting of $3.5B in cash and $4.5B in shares of Illumina common stock, subject to a collar. Illumina currently holds 14.5% of GRAIL’s shares outstanding, and approximately 12% on a fully diluted basis.
The collar on the stock consideration will ensure that GRAIL stockholders excluding Illumina receive a number of Illumina shares equal to approximately $4B in value if the 20-trading-day volume weighted average price of Illumina stock as of 10 trading days prior to closing is between $295 and $399.
GRAIL stockholders excluding Illumina will receive approximately 9.9M Illumina shares if the 20-trading-day volume weighted average price of Illumina stock as of 10 trading days prior to closing is above $399 and approximately 13.4M Illumina shares if the 20-trading-day volume weighted average price of Illumina stock as of 10 trading days prior to closing is below $295.
Upon closing of the transaction, current Illumina stockholders are expected to own approximately 93% of the combined company, while GRAIL stockholders are expected to own approximately 7% based on the mid-point of the collar.
The cash consideration to GRAIL stockholders excluding Illumina of approximately $3.1B is expected to be funded using balance sheet cash of both Illumina and GRAIL plus up to $1B in capital raised through either a debt or equity issuance.
In advance of this anticipated issuance, Illumina has obtained financing commitments for a $1B bridge facility with Goldman Sachs Bank USA.
In connection with the transaction, GRAIL stockholders will also receive contingent value rights, which will entitle holders to receive future payments representing a pro rata portion of certain GRAIL-related revenues each year for a 12-year period. This will reflect a 2.5% payment right to the first $1B of revenue each year for 12 years.
Revenue above $1B each year would be subject to a 9% contingent payment right during this same period. Illumina will offer GRAIL stockholders the option to receive additional cash and/or stock consideration, in an amount to be determined prior to closing, in lieu of the contingent value rights.
The company expects the transaction will be accretive to Illumina revenue starting in 2021, and to accelerate revenue growth over time.
ILMN closed at $270.13 on Monday.
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