In its most recent effort to increase the number of smart home products it offers, Amazon.com Inc. will pay around $1.7 billion in cash to acquire iRobot Corp., the company behind the robotic vacuum cleaner Roomba.
Amazon will purchase iRobot for $61 per share, valuing the company at a 22% premium to its most recent closing price of $49.99.
iRobot’s stock increased 19% to $59.66 on Friday. Shares of iRobot were more than twice that amount at their peak during the COVID-19 pandemic lockdowns as people bought high-end vacuum cleaners out of concern for their hygiene.
The acquisition accomplishes a vision that Amazon first presented in 2021. “In five to 10 years, we believe every home will have at least one robot that will become a core part of your everyday life,” said Amazon Senior Vice President Dave Limp to reporters.
Colin Angle, the CEO of iRobot, has also stated that one day, homes would contain a wide variety of connected devices that can help with societal issues like eldercare.
Even though Amazon’s products division only contributes a small portion of the company’s revenue, the e-commerce giant has slowly increased the number of speakers that feature its Alexa voice assistant and added Ring’s home security doorbells and cameras, which it acquired in 2018.
The American Federal Trade Commission would probably examine the purchase, according to Ethan Glass, an antitrust specialist with the law firm Cooley LLP.
“I would say there is a three out of four chance of a deep investigation and a one out of four chance of a challenge,” he said. “The political appointees have made clear that they would rather go to court and lose than let a deal through that later is criticized as anti-competitive.”
Amazon declared that it will keep iRobot products available to other sellers and maintain their compatibility with voice assistants made by other companies.
In addition to cleaning up debris, Roomba vacuums, which can cost up to $1,000, gather geographical data about homes that may be useful for upcoming smart home technology. A critic of the deal, Ron Knox of the Institute for Local Self-Reliance, described it as a privacy “nightmare” on Twitter since it would give the retailer access to more details about people’s homes.
The success of iRobot suffered when customers began to second-guess their purchases due to growing inflation. Due to poor demand from merchants in North America, Europe, the Middle East, and Africa, its second-quarter revenue dropped by 30%.
The acquisition occurs at a time when experts anticipate cash-rich technology businesses to go on an M&A spree to take advantage of depressed valuations brought on by pressures on growth. With over $37 billion in cash and cash equivalents, Amazon just announced a plan to acquire primary care provider One Medical.
“It seems like (CEO) Andy Jassy is going to employ M&A more than (predecessor) Jeff Bezos and it makes more sense to me now that Amazon is bigger and has more cash,” said D.A. Davidson analyst Thomas Forte. Amazon would be obligated to pay iRobot a $94 million termination fee if the deal falls through. When the acquisition is finalised, Angle will continue to serve as iRobot’s CEO.