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Illumina Sued Again Over Roche Bid

NEW YORK (GenomeWeb News) – A class action lawsuit has been filed against Illumina alleging a breach of fiduciary duties by its board in connection with Roche's $5.7 billion hostile bid for the company.

The lawsuit, filed earlier this week in the US District Court, Southern District of California, is at least the fifth related to the bid, and accuses Illumina's board of breaching their fiduciary duties after it turned down Roche's bid and refused to negotiate.

The complaint names Illumina President and CEO Jay Flatley, Chairman William Rastetter, and other board members as defendants.

In the suit, the lead plaintiff Michael Derfler calls the board's actions "self-interested" and notes that Roche's offer of $44.50 per share represented a 64 percent premium over Illumina's stock price leading up to the offer made on Jan. 24.

In mid-afternoon trading on the Nasdaq, shares of Illumina were down a fraction of 1 percent at $50.40.

"Instead of using Illumina's strong interest as leverage to negotiate for a higher price, the board has decided to hide behind a stockholder rights plan ("Poison Pill") as a defense against" Roche's bid, Derfler said in his complaint.

Illumina implemented its Poison Pill plan two days after Roche's hostile bid.

"Through the adoption of a Poison Pill Illumina's board constructed a nearly insurmountable defense to hostile offers, removing any doubt that Illumina would seek to remain independent at nearly any cost," the complaint further said, and added that by refusing to negotiate with Roche, Illumina has preempted any possibility that Roche would increase its offer.

It also claims a conflict of interest on the part of investment bank Goldman Sachs, which Illumina has hired to advise it on the Roche matter. According to the complaint, Goldman stands to lose hundreds of millions of dollars if Roche's offer is accepted by Illumina.

Derfler is seeking damages of an amount to be determined at trial and asks the court to enjoin Illumina's directors from using the Poison Pill plan.

An Illumina spokesperson told GenomeWeb Daily News, "The company believes the claims to be without merit and intends to defend against them vigorously."

In Illumina's Form 10-K dated Feb. 23, the company said there has been four other class action lawsuits filed against it related to Roche's efforts to acquire the firm. One lawsuit filed in Delaware accuses the company of a breach of fiduciary duties and a failure to act in the best interest of its shareholders.

At an investment conference on Wednesday, Flatley repeated Illumina's position that the Roche offer is "woefully inadequate" and said that Illumina is not currently in negotiations with Roche but will analyze any offer that may come. The board has not determined any price that would trigger negotiations, he added.

In a proxy statement made last week to shareholders, Illumina urged them to reject the current offer.

Meanwhile, at Roche's general meeting earlier this week, Chairman Franz Humer said that in the case that Roche fails in its plan to acquire Illumina, it has "other options," though he did not elaborate.