Illumina can survive loss of chair and CEO, says board director

Illumina is strong enough to survive the loss of its chair John Thompson and chief executive Francis deSouza if shareholders vote them down at an annual meeting on Thursday, a director of the company has said.

Gary Guthart told the Financial Times there is depth on the board and management of the world’s biggest gene sequencing company beyond the two executives, who have been targeted in a proxy battle waged by activist investor Carl Icahn.

“John’s a highly capable man. That said, I think the board is capable of working through succession should it occur. That’s not the preference of the board, but should it occur, the board is prepared to do that. And likewise in management,” Guthart said in an interview.

Guthart, who joined Illumina’s board in 2017 and is chief executive of Intuitive Surgical, said Illumina’s chief technology officer Alex Aravanis and chief commercial officer Susan Tousi are both “outstanding” and “experienced” leaders.

Thursday’s showdown caps one of the biggest activist battles of 2023 that is headed to a vote. Campaigns at Disney and Salesforce settled before any shareholder votes.

With less than 48 hours before the meeting, there are no signs of an agreement between Icahn and Illumina. Guthart said board members were not opposed to “answering the phone” if any deal could satisfy both parties.

Icahn alleges that Thompson and deSouza championed a “reckless decision” to close Illumina’s $8bn acquisition of cancer test developer Grail in 2021 against the wishes of EU and US antitrust regulators. Illumina’s market capitalisation has plunged from $75bn in August 2021, when it bought Grail, to just over $32bn on Tuesday.

Icahn, who has a 1.4 per cent stake in Illumina, has alleged its board lacks independence and most directors were handpicked by deSouza. He has nominated three directors to Illumina’s board.

Thompson, a former chair and now a director at Microsoft, looks increasingly vulnerable ahead of the annual meeting. Proxy firm Glass Lewis sided with Icahn on several points, noting the board’s decision to appoint Thompson as Illumina chair was “rather weak” given his relationship with deSouza prior to joining the company.

Thompson was chief executive of computer security group Symantec at the time of its February 2006 acquisition of IMlogic, a company founded and led by deSouza. The men worked together at Symantec for several years following the deal, which provided a “significant windfall” to deSouza, according to Glass Lewis’s report.

Proxy firm ISS recommended shareholders vote to replace Thompson with Icahn’s nominee Andrew Teno but vote in favour of deSouza, who is also a director at Disney.

Icahn’s investment house has encountered its own criticism during the proxy battle, coming under attack this month by short seller Hindenburg Research. Icahn Enterprises has called Hindenburg’s claims “misleading and self-serving”.

Guthart said he rejected Icahn’s allegations about a lack of board independence and believed the process to acquire Grail was “adequately informed” and “independently run”.

“Francis did not handpick board members. This isn’t a board that are friends of Francis,” he said.

However, Jill Fisch, a scholar at University of Pennsylvania law school, said this was not a case where people would say Icahn is “tilting at windmills”.

“One thing that jumped out at me was the close relationship between CEO and chair,” she said. With such a close relationship, a company could lose the benefit of independent oversight, she said.