iRobot and Amazon call it quits, terminate acquisition agreement
Reading Time: 4 minutesAmazon has ended its bid to acquire iRobot, the maker of robotic vacuums, after running up against headwinds with European regulators.
Amazon and iRobot have opted to mutually terminate their previously announced acquisition agreement, under which Amazon would’ve purchased iRobot for ~$1.7 billion in cash (or slightly lower). In a press release, the companies said that they saw ‘no path to regulatory approval in the European Union,’ preventing a deal from moving forward.
‘We’re disappointed that Amazon’s acquisition of iRobot could not proceed,’ David Zapolsky, Amazon SVP and general counsel, said in a canned statement. ‘We’re believers in the future of consumer robotics in the home and have always been fans of iRobot’s products, which delight consumers and solve problems in ways that improve their lives. Amazon and iRobot were excited to see what our teams could build together, and we’re deeply grateful to everyone who worked tirelessly to try and make this collaboration a reality.’
iRobot will receive a $94 million termination fee from Amazon as a result of the nixed bid. But the failed acquisition will also necessitate an ‘operational restructuring plan’ on iRobot’s part, the company says, involving laying off roughly 350 iRobot employees — about 31% of the company’s workforce — by April.
That restructuring comes on top of cuts iRobot made shortly after the Amazon acquisition deal was announced. In an attempt to reduce debt (excluding a $200 million debt round raised in July), iRobot cut headcount twice — once in August 2022 and again in February 2023.
Bloomberg notes that iRobot had racked up about $500 million in net losses since the second quarter of 2021. The publicly traded company, whose market cap now stands at less than $400 million, had an adjusted operating loss of about $200 million in 2023.
Colin Angle, iRobot’s chairman of the board of directors and CEO, has stepped down as chairman and CEO as of today, and Glen Weinstein, iRobot’s EVP and chief legal officer, has been appointed interim CEO. iRobot lead independent board director Andrew Miller has been appointed chairman of the board, and iRobot has hired a ‘turnaround expert,’ Jeff Engel, to lead implementation of the restructuring.
‘iRobot is a powerful company, and its mission remains to change the world empowering people to do more,’ Angle said in a LinkedIn post. ‘It’s the home to talented builders, to optimism, to possibility and to unbridled determination and resilience. To those I have shared this journey with, I am forever grateful. I look forward to serving as a senior advisor and remaining on the board through my current term.’
iRobot aims to save $80 million to $100 million through renewed agreements with manufacturing partners on more attractive terms; $20 million through increased offshoring; and $30 million by consolidating its sales and marketing spending. The company also plans to reduce its corporate real estate footprint and pause all work related to ‘non-floorcare innovations,’ including air purification, robotic lawn mowing (a reference to iRobot’s long-shuttered Terra project, presumably) and education.
iRobot anticipates that the restructuring will cost between $12 million and $13 million, primarily for severance and expenses related to layoffs, over the first two quarters of 2024, with the majority expected in Q1.
Amazon’s megabucks iRobot deal attracted regulatory scrutiny from the start. While the U.K. ultimately approved the acquisition after some reluctance, the European Commission pushed ahead with a more in-depth probe, while the U.S. Federal Trade Commission mulled an investigation into how the deal might affect Amazon’s influence over the smart home market and potentially violate users’ privacy by giving the retail giant access to data on their homes.
EU regulators expressed concern that Amazon would demote other robotic vacuum cleaners on its platform in favor of its own products and find it ‘economically profitable’ to shut out rivals. Amazon considered an appeal, but decided against it after determining that the process would likely take years, according to Bloomberg.
In a statement, European Commission EVP Margrethe Vestager, in charge of competition policy, said:
‘Our in-depth investigation preliminarily showed that the acquisition of iRobot would have enabled Amazon to foreclose iRobot’s rivals by restricting or degrading access to the Amazon Stores … Such foreclosure strategies could have restricted competition in the market for robot vacuum cleaners, leading to higher prices, lower quality and less innovation for consumers.’
iRobot was founded in 1990 by MIT Artificial Intelligence Lab members Rodney Brooks, Angle and Helen Greiner. Twelve years after its launch, the company introduced the Roomba, a brand that has since become synonymous with the category, selling more than 30 million units as of 2020.
Amazon, too, has been aggressively tackling the robotics space, making small steps into the home with the launch of Astro, a robot that’s so far struggled to gain traction with consumers.
Amazon and iRobot have had an increasingly close partnership over the past several years, through Roomba’s embrace of Alexa functionality and use of AWS servers. The retailer has long been iRobot’s biggest customer, at times accounting for more than a quarter of sales.
iRobot’s shares fell about 16% in premarket trading in New York this morning.
Ref: techcrunch
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