In new Phase 2 filings made public today (October 24), it seems clear that the U.K.’s Competition and Markets Authority (or CMA) remains hellbent on blocking Illumina’s (ILMN) acquisition of Pacific Biosciences (NASDAQ:PACB), even though the information provided by the CMA itself seems to refute many of its core findings/concerns. While these discrepancies do undermine the CMA’s case and support those who believe there is no credible objection to the merger (myself included), it’s unclear to me if Illumina would be willing to pursue legal remedies to push this acquisition through, and of course also unclear whether such an option would work. Although Illumina has not yet abandoned the deal, I believe it makes more sense to value PacBio on the assumption of no deal. I still believe the standalone value of PacBio to be above $6, but the path forward without Illumina will be high-risk and suitable only for very aggressive investors who can accept the very real risk that PacBio ultimately goes bankrupt.
The CMA Sticks To Its Guns
On October 24, the CMA offered up its provisional Phase 2 findings regarding the proposed Illumina acquisition of PacBio. In short, there was little here that was new or different from the Phase 1 findings – namely that the CMA believes this merger will significantly reduce competition in the genomic sequencing market and that it is bad for customers.
Given that the CMA itself presented contradicting feedback to these conclusions, I feel the Phase 2 findings are more on the order of “<regulators covering ears>: la la la ‘we can’t hear you’ la la la”. Facetious, yes, but I believe the CMA is very much wrong about this transaction and its impact on the market.
As cited in a submission from Shawn Baker, a PhD with long experience in the
