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Vista Capital Management Sues Illumina for More than $10M Over Rejection of Roche

NEW YORK (GenomeWeb News) – A substantial investor in Illumina's stock is suing the company alleging breach of fiduciary duty in connection with Roche's efforts to buy the San Diego-based company and its efforts to fend off that approach.

In a lawsuit filed with the US District Court, Southern District of New York this week, the plaintiffs, Vista Capital Management, seeks damages of more than $10 million.

Based in Geneva, Vista is a privately held financial services firm that owned more than 300,000 shares of Illumina stock during the periods covered by its lawsuit.

As of the end of 2012, Illumina has about 123 million shares of its common stock outstanding.

The litigation stems from Roche's efforts last year to buy Illumina and Illumina's subsequent rejections of the drug and diagnostic firm's overtures. Roche launched a hostile bid for Illumina initially at a price of $5.7 billion then upped the offer to $6.7 billion.

Roche eventually abandoned its efforts after Illumina implemented a poison pill provision, and its shareholders reelected several of Illumina's board members and rejected a maneuver by Roche intended to gain control of its board.

More recently, media reports surfaced that Roche had revisited plans to purchase Illumina for more than $8 billion. But a Roche official subsequently said that those plans were "off the table."

In its complaint, Vista alleges Illumina and its board's breach of fiduciary duties arise "from their self-interested refusal to enter into meaningful discussions or negotiations in response to multiple offers to acquire [Illumina] made by [Roche] at prices substantially above Illumina's market price."

In February 2012 Illumina had issued a statement to its shareholders recommending they reject Roche's bid. Vista alleges Illumina withheld material information and made misleading statements in that document, however. Specifically, Vista said that the company failed to provide meaningful information about its growth opportunities and financial projections, depriving shareholders of the ability to properly evaluate Roche's offer.

Illumina also did not lay out other strategic alternatives that its board considered when it rejected Roche's bid, Vista said, and Illumina failed to disclose the financial analysis provided by Goldman Sachs and Merrill Lynch in February 2012, when the investment banks recommended Illumina turn down Roche.

The two banks had been hired by Illumina to advise it on the Roche transaction, and Illumina's board relied on their recommendations when it chose to slam the door on Roche, Vista said.

Following the report from Switzerland in December that Illumina rejected Roche's most recent offer for $66 per share —a report that was never confirmed by either Roche or Illumina — Vista sent a letter to Illumina Chairman William Rastetter to ask why. Illumina has not responded to the letter, Vista stated in its complaint.

Vista claimed in the suit that Illumina and its board have failed to maximize the value of the company to its public shareholders and failed to maximize the value of the company's stock.

Furthermore, "[t]hey ignored or did not protect against the numerous conflicts of interest resulting from the directors' own inter-relationships in connection with their refusal to consider bona fide and legitimate expressions of interest to acquire [Illumina] at a premium," Vista alleged.

A spokesperson for Illumina declined to comment on the lawsuit. Vista did not respond to a request for comment.

In afternoon trading on the Nasdaq, shares of Illumina were down about 2 percent to $48.77.