Illumina/Pacific Biosciences: FTC Prepares to File Suit Next Month in Administrative Court to Block Deal

Published on Nov 06, 2019

The FTC is preparing to sue next month in its administrative court to block Illumina’s (lLMN) proposed $1.2 billion acquisition of Pacific Biosciences (PACB), sources familiar with the matter said.

For some time agency staff has been building a case, deposing third parties and lining up potential witnesses while rejecting the companies’ arguments that their short-read and long-read gene-sequencing instruments don’t compete.

An FTC suit would raise a significant—and potentially insurmountable—obstacle for the troubled deal following the UK Competition and Markets Authority’s (CMA) October 24 provisional findings that the transaction would create considerable antitrust problems with no likely fix.

Provisional findings usually reflect CMA’s final decision, which the agency said it will disclose in the Illumina/PacBio case by December 11. FTC work on the investigation has slowed as the agency waits for the UK agency to issue its final decision, the sources said.

The CMA’s opposition to the gene-sequencing merger would eliminate the FTC’s need to request from a U.S. district court an order or injunction preventing the deal’s close.

Instead the agency could sue in its administrative court, where it almost always wins. The venue also creates significant timing hurdles for merging parties—unlike a district court trial, which typically generates a decision in four to five months, the administrative process can take nine to 12 months to yield an initial decision.

The commission used this administrative approach in its December 2017 lawsuit to block Tronox’s proposed purchase of Cristal’s titanium dioxide business, taking advantage of the European Commission’s ongoing review of the deal, which prevented the parties from closing the transaction.

The EC ultimately approved the deal in July 2018, which forced the FTC to go to district court to obtain an injunction preventing the deal from closing. But with the agency’s administrative trial nearly finished, the district court held only an abbreviated hearing before granting the FTC’s motion.

The FTC could use the administrative process here because the CMA’s ongoing Phase 2 review of the deal prevents the companies from consummating their deal. A CMA decision to prohibit the merger would further extend that bar, although the companies could appeal the decision to the nation’s Competition Appeal Tribunal.

The companies’ merger agreement’s current end date is December 31, which Illumina has a unilateral right to extend to March 31. To fight the FTC in its administrative court, however, would require the companies to hold their deal together until late 2020.

Illumina must pay PacBio a $98 million break free if the transaction doesn’t close due to antitrust opposition.