Amazon and robot vacuum manufacturer, iRobot, have jointly announced the termination of their proposed merger, citing insurmountable challenges in gaining approval from EU and U.S. antitrust regulators as the reason for abandoning the $1.4 billion deal.
iRobot concurrently unveiled a significant restructuring plan designed to cut costs, including a workforce reduction of approximately 31%, equating to 350 jobs. Additionally, Colin Angle, the founder of iRobot and CEO of the Roomba robot vacuum manufacturer, has stepped down from his position. Angle stated that, given the current challenges, he and the board mutually agreed that iRobot would benefit from new leadership with turnaround experience.
The European Union’s antitrust chief, Margrethe Vestager, disclosed that an in-depth investigation indicated that Amazon’s acquisition of iRobot could potentially harm competition. Preliminary findings suggested that the merger would empower Amazon to limit access to its stores for iRobot’s rivals, leading to potential foreclosure of competitors. Concerns were particularly raised for markets in France, Germany, Italy, and Spain.
Vestager explained that Amazon might have delisted rival robot vacuum cleaners, reduced their visibility, or increased costs for iRobot’s competitors to advertise and sell their products on Amazon’s marketplace. Simultaneously, the U.S. Federal Trade Commission (FTC) was reportedly prepared to reject the deal before its abandonment was officially announced.
Critics of the deal also expressed concerns that the merger would further strengthen Amazon’s dominance in the smart home devices market. Amazon continues to face regulatory challenges, including an ongoing court battle with the FTC over allegations of using illegal strategies to boost profits in its online retail empire.
Amazon, the world’s largest online retailer, expressed disappointment over the failed acquisition, noting its belief in the future of consumer robotics in the home. David Zapolsky, Amazon’s general counsel, stated, “We’re believers in the future of consumer robotics in the home and have always been fans of iRobot’s products.”
As part of the terminated merger agreement, Amazon will pay iRobot a $94 million termination fee. iRobot anticipates reporting full-year 2023 revenue of $891 million, reflecting a 25% reduction, and expects a loss between $265 million and $285 million.
iRobot shares experienced a 7.2% decline in afternoon trading on Monday, with shares falling by half since reports surfaced two weeks ago regarding potential regulatory blocks by EU regulators. In contrast, Amazon shares rose nearly 1%.
