Updated January 29th, 2024 at 21:16 IST
Amazon, iRobot merger plan scrapped amid EU antitrust opposition
The proposed $1.4 billion acquisition of iRobot by Amazon faced insurmountable obstacles in gaining regulatory approval from the European Union.
- 3 min read
Amazon iRobot merger: Online retail giant Amazon, and leading robot vacuum manufacturer iRobot declared the termination of their merger plans due to opposition from European Union (EU) antitrust regulators. As a part of its response to the merger setback, iRobot revealed a substantial restructuring plan aimed at cost reduction. The company disclosed its intention to cut approximately 31 per cent of its workforce, translating to 350 jobs. Additionally, iRobot founder Colin Angle has resigned from his position as CEO. Angle expressed that, given the prevailing challenges, he and the board mutually concluded that iRobot would benefit from new leadership with turnaround expertise.
The proposed $1.4 billion acquisition of iRobot by Amazon faced insurmountable obstacles in gaining regulatory approval from the European Union. Earlier this month, Reuters reported that the European Commission antitrust regulators were poised to block the deal. Their primary concerns centered on fears that Amazon might impede iRobot's competitors on its online marketplace, particularly in France, Germany, Italy, and Spain.
Amazon, the world's largest online retailer, had announced the merger in August 2022. The company, already the owner of Alexa and Ring, sought to expand its array of smart home devices while also venturing into the virtual healthcare sector.
David Zapolsky, Amazon's general counsel, expressed disappointment over the failed acquisition. "We're believers in the future of consumer robotics in the home and have always been fans of iRobot's products," he said in a statement.
iRobot, headquartered in Bedford, Massachusetts, anticipates reporting a full-year 2023 revenue of $891 million, reflecting a 25 per cent reduction. The company also expects to incur a loss ranging between $265 and $285 million. Under the merger agreement terms, Amazon is obligated to pay iRobot a $94 million termination fee.
Despite completing recent deals such as the acquisition of healthcare provider One Medical and MGM's movie catalogue, Amazon's track record with competition regulators has been mixed. The company is currently embroiled in a prolonged court battle in a Seattle federal court with the Federal Trade Commission (FTC). The FTC has accused Amazon of utilizing illegal strategies to boost profits within its online retail empire, including an algorithm allegedly responsible for inflating prices by over $1 billion.
In response to the abandoned merger, iRobot shares experienced an 18.5 per cent decline in pre-market trading on Monday. Over the past two weeks since initial reports surfaced about the potential EU regulatory blockade, iRobot shares have plummeted by half.
Critics of the proposed merger argued that it would further strengthen Amazon.com's already dominant position in the smart home devices market.
(With Reuters inputs.)
Published January 29th, 2024 at 21:16 IST