Illumina-Grail Deal Wipes Out $3.5 Billion More Than It’s Worth

(Bloomberg) -- Illumina Inc.’s move to buy the cancer-detection startup Grail Inc. has wiped out $11.5 billion in market value since Bloomberg News first reported its intentions on Wednesday. That’s $3.5 billion more than the deal’s sticker price.

San Diego-based Illumina has been punished with its worst four-day losing streak since 2016, as analysts and investors questioned its motive to buy Grail, a company it once owned.

Cowen analyst Doug Schenkel wrote that the company will need to convince investors on competition concerns, the company’s track record and its valuation. The stock fell as much as 12% Monday before paring losses -- it had lost more than a quarter of its value at the morning’s bottom since last Tuesday’s close.

The $8 billion deal will net Grail shareholders $3.5 billion in cash and $4.5 billion in Illumina common stock, the companies said in a statement. Grail holders are expected to make up roughly 7% of Illumina once the deal closes, according to a company slide show.

Grail, which counts Jeff Bezos and Bill Gates as investors, had filed to go public later this month. For Illumina, the move is intended to spark growth, and may remind investors of its failed attempt to buy Pacific Biosciences of California Inc. almost two years ago for $1.2 billion. That deal was thwarted by U.S. antitrust enforcers, who argued the overlap of their DNA sequencing machines would block competition.

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