Amazon Connected Device Cart Grows With $1.7 Billion Deal For Roomba Maker

Aug 5 (Reuters) – Amazon.com Inc (AMZN.O) It will acquire iRobot Corp (IRBT.O)Ltd., the maker of a Roomba robotic vacuum cleaner, is in an all-cash deal of about $1.7 billion, in the latest push by the world’s largest online retailer to expand its stable of smart home devices.

Amazon will pay $61 per share, evaluating iRobot at a 22% premium over the stock’s last closing price of $49.99.

Shares of iRobot rose 19% in early trading Friday to $59.56. At its height during pandemic lockdowns, iRobot was trading at more than double that price as hygiene-conscious consumers invested in premium vacuum cleaners.

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Amazon already has Alexa’s virtual assistant, Ring, which monitors homes, and a smart thermostat, giving it a range of products in the “internet of things” category, said Ethan Glass, an antitrust expert at law firm Cooley LLP.

He said the US Federal Trade Commission, which is already investigating Amazon, is likely to review the deal.

“I would say there is a three out of four chance of a deep investigation and a one in four chance of a challenge,” he said. “Political appointees have made it clear that they would rather go to court and lose than allow a deal through that later to be criticized as anti-competitive, especially as they seek to change the laws.”

Charlotte Solomon of Public Knowledge added that antitrust enforcers now view the risk of lack of enforcement as a problem rather than just an over-enforcement. “The costs of inaction are much higher than antitrust experts had thought,” she said.

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In addition to sweeping dirt, Roomba vacuums that cost up to $1,000 collect spatial data on homes that could be valuable to companies developing smart home technology.

But iRobot’s fortunes have taken a hit as consumers begin to rethink how they spend their money amid rising inflation. Its second-quarter revenue fell 30% due to weak demand from retailers in North America, Europe, the Middle East and Africa.

The deal comes at a time when analysts are expecting the cash-rich technology companies to undertake a merger and acquisition process to take advantage of lower valuations due to growth pressures. Amazon currently has cash and cash equivalents of more than $37 billion.

The devices make up a fraction of Amazon’s overall sales, but it includes smart thermostats, safety devices, and it recently launched a dog-like robot called Astro.

“It looks like (CEO) Andy Gacy will be hiring more M&A than (his predecessor) Jeff Bezos, and it makes more sense to me now that Amazon is bigger and has more money,” said Thomas Forte, analyst at DA Davidson.

If the deal fails, Amazon will be required to pay iRobot a $94 million termination fee. Upon completion of the deal, Colin Angle will remain as CEO of iRobot.

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Additional reporting by Akash Sriram and Nivedita Balu in Bengaluru Additional reporting by Diane Bartz in Washington; Editing by Aaron Koyor and Mark Potter

Our criteria: Thomson Reuters Trust Principles.

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