Complete Genomics continues to spurn Illumina offer

Company to proceed with definitive merger agreement with BGI

Kelsey Kaustinen
MOUNTAIN VIEW, Calif.—Complete Genomics, Inc. has once again rejected Illumina Inc.'s acquisition offer, continuing oncourse with its standing acquisition agreement by BGI-Shenzhen.
 
Complete Genomics and BGI first announced the signing of adefinitive merger agreement on Sept. 17, under which a wholly owned U.S.subsidiary of BGI would commence a tender offer to purchase all of CompleteGenomics' outstanding shares of common stock for $3.15 per share, for anaggregate total of approximately $117.6 million. The offer represented a 54percent premium over the closing price of $2.04 per share registered on June 4,the last trading day before Complete Genomics announced that it would beundergoing an evaluation of strategic alternatives.
 
Complete Genomics announced that its board of directors hadunanimously recommended that the company's shareholders tender their shares tothe offer. Additionally, Complete Genomics and a BGI affiliate entered into anagreement under which Complete Genomics would receive up to $30 million inbridge financing for operations after the merger agreement was signed. Theoffer was originally scheduled to expire at midnight on Nov. 21, and wasextended by BGI on Nov. 20, with a new expiration date of Dec. 14. As of Nov.20, approximately 15.4 million shares of Complete Genomics' stock, roughly 44percent, were tendered into the offer.
 
 
At the time of the announcement, Dr. Clifford Reid, chairmanand CEO of Complete Genomics, said the transaction "represents the best outcomefor our stockholders, offering them liquidity and a premium value. In addition,it offers a great outcome for our customers, present and future."
 
Illumina admitted two weeks ago that it was the Party Hreferenced in a U.S. Securities and Exchange (SEC) document filed by CompleteGenomics. Illumina's offer was for $3.30 per share, representing anapproximately 5 percent premium over BGI's offer, and was an all-cash offerwithout "any condition for further due diligence."
 
 
Despite the larger price tag, Complete Genomics has rejectedthe proposal twice, both in its SEC document, in which it referenced Party H'soffer and noted its refusal, and again in the past week. Illumina's CEO JayFlatley sent Complete Genomics a letter last week to reconsider the offer,which was answered roundly in the negative in a Nov. 27 filing by CompleteGenomics, who noted that its board of directors "again unanimously concludedthat Illumina's proposal remained inadequate, remained not in the bestinterests of the company's stockholders, and continued to not constitute asuperior proposal, as defined in the merger agreement because … there issubstantial likelihood that a proposed transaction between the company andIllumina would fail to receive antitrust clearance and is not reasonablycapable of being consummated."
 
In the midst of Complete Genomics' spurning of Illumina'soffer is the two companies' ongoing patent litigation. Illumina filed itssecond patent infringement suit against Complete Genomics in June, regardingU.S. Patent No. 8,192,930, entitled "Method for Sequencing a PolynucleotideTemplate." According to the press release, "The suit targets Complete Genomics'Combinatorial Probe-Anchor Ligation (cPal) read technology." The companypreviously sued Complete Genomics for infringing on U.S. Patent No. 6,306,597.Illumina announced on Oct. 18 that a judge had ruled against certain of itsclaims for the latter patent, with another announcement on Nov. 26 thatIllumina's request to file a motion seeking reconsideration had been granted.

Kelsey Kaustinen

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