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Illumina CEO deSouza resigns after proxy battle with Icahn

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(Reuters) -Illumina CEO Francis deSouza stepped down on Sunday, marking a victory for activist investor Carl Icahn and heightening expectations that it could unwind its controversial $7.1 billion acquisition of Grail.

The gene-sequencing machine maker had repurchased Grail, a cancer diagnostic test maker, in 2021 despite opposition from U.S. and European antitrust regulators – a decision that prompted Icahn to pursue a proxy fight at Illumina, arguing it should be divested as it had cost investors billions of dollars.

Illumina said on Sunday its board had accepted deSouza’s resignation. It has begun a search for a new CEO and named Charles Dadswell, senior vice president and general counsel, as interim chief executive. DeSouza will stay on in an advisory capacity until July 31, it said.

Analysts said they expect the company’s shares to trade higher on Monday morning after deSouza’s resignation.

The Grail deal “has kept a lot of investors out of the stock” TD Cowen analyst Dan Brennan said. “With Francis now stepping aside, I think the certainty of a Grail exit definitely goes up.”

The company’s shares have lost about 60% of their value since completing the Grail deal in 2021. Illumina shares closed at $200.53 on the Nasdaq on Friday.

Icahn in a tweet said he is happy with the recent changes at Illumina and considers them a “very positive occurrence.”

“The new additions to the board, the CEO transition, as well as the change of the Chairman, are significant positives that should drive value for all stakeholders and human health,” he added.

The proxy battle began in March and ended with a May vote in which Icahn won enough shareholder support to oust the board chair, John Thompson, and install his nominee, Andrew Teno. Icahn has said he wants former Illumina CEO Jay Flatley to return.

DeSouza in a letter to employees on LinkedIn said, “My belief in the potential of GRAIL’s potentially life-saving technology and the benefits of merging it with Illumina remains unshakeable.”

DeSouza’s departure was not a foregone conclusion. He had secured more than twice the number of shareholder votes than his challenger received in the proxy vote, which could have given him enough legitimacy to hang on.

Vicki Hollub, for instance, remains Occidental Petroleum’s CEO after the company cut a deal with Icahn over board seats in 2020 and after Icahn cashed out two years later.

Still, there is a history of CEOs leaving. Unilever Plc CEO Alan Jope announced plans to leave three months after hedge fund Trian Fund Management’s Nelson Peltz joined the consumer giant’s board last year.

Illumina earlier this month filed an appeal against an order from the U.S. Federal Trade Commission that demanded it divest Grail on competition concerns.

(Reporting by Lavanya Ahire in Bengaluru and Caroline Humer in New York; Additional reporting by Michael Erman in New Jersey and Anirban Sen in New York; Editing by Mark Porter, Marguerita Choy and Edwina Gibbs)

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