UPDATE 2-EU approves Illumina's plan to divest cancer test maker Grail

(Adds Illumina's statement in paragraph 2 and 7, details in paragraphs 10 to 12)

By Foo Yun Chee

BRUSSELS, April 12 (Reuters) - U.S. gene sequencing company Illumina's plan to divest cancer diagnostic test maker Grail received the green light from EU antitrust regulators on Friday after having blocked the deal two years ago.

The company said it has reached an agreement with the European Commission on specific divestment options, but the method has not been finalised.

Illumina founded Grail and spun it off in 2016, but re-acquired it in 2021 for $7.1 billion to enter the cancer early-detection market, before first securing EU regulatory approval.

That prompted the commission, which acts as the competition enforcer in the 27-country European Union, to order the company to keep Grail separate from Illumina.

Its subsequent investigation resulted in a 432 million euro ($459.48 million) fine for Illumina and an order to sell Grail.

The EU watchdog again vetoed the deal in 2022, saying it would stifle innovation and reduce choice in the emerging market for blood-based early cancer detection tests.

San Diego-based Illumina said it was exploring options to divest Grail and the final terms would be settled by the second quarter of 2024.

"The divestment plan foresees that Illumina can select the appropriate divestment method (either via a trade sale or a capital markets transaction)," the Commission said.

It said the sale would restore Grail's independence and allow it to operate it as a viable and competitive business.

Under the terms of the order, if Illumina opts for a capital markets transaction, it must capitalize Grail at the time of the transaction with two-and-a-half years of funding.

Based on the liquid biopsy maker's long-range plan, Illumina said the funding is estimated at about $1 billion.

The company also battled U.S. antitrust regulators and faced fierce opposition from activist investor Carl Icahn who opposed the deal. ($1 = 0.9402 euros) (Additional reporting By Pratik Jain in Bengaluru; Writing by Nette Nöstlinger; Editing by Charlotte Van Campenhout, Jason Neely and Arun Koyyur)