Amazon has withdrawn its proposal to acquire Irobot, a robotic vacuum manufacturer, due to regulatory challenges in Europe. Amazon and iRobot have mutually agreed to terminate their previously declared acquisition agreement, which would have seen Amazon buy iRobot for approximately $1.7 billion in cash.
The companies stated in a press release that they foresaw “no path to regulatory approval in the European Union,” thus hindering the deal from progressing.
David Zapolsky, Amazon SVP and General Counsel, said in a canned statement;
We’re disappointed that Amazon’s acquisition of iRobot could not proceed. 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.
Following the abandoned acquisition bid, Amazon will pay iRobot a termination fee of $94 million. However, iRobot states that the failed deal will also necessitate an “operational restructuring plan”. The plan involves laying off approximately 350 iRobot employees, which is around 31% of the company’s workforce, by April.
This restructuring follows cuts that iRobot had already made shortly after the Amazon acquisition deal was first announced. The company reduced headcount twice, in August 2022 and February 2023, in an effort to decrease debt (not including a $200 million debt round raised in July).
Bloomberg reports that iRobot had accumulated about $500 million in net losses since the second quarter of 2021. The publicly traded company, now with a market capitalization of less than $400 million, had an adjusted operating loss of around $200 million in 2023.
Furthermore, Colin Angle, Chairman of the Board of Directors and CEO at iRobot, stepped down from these positions today. Glen Weinstein, iRobot’s EVP and Chief Legal Officer, has been appointed as the interim CEO. iRobot lead independent board director, Andrew Miller, has been appointed Chairman of the Board. Additionally, iRobot has recruited a “turnaround expert”, Jeff Engel, to lead the execution of the restructuring plan.
Angle said in a LinkedIn post;
iRobot is a powerful company, and its mission remains to change the world empowering people to do more. 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 plans to save between $80 million to $100 million by renegotiating agreements with manufacturing partners under better terms, save $20 million through increased offshoring, and consolidate its sales and marketing expenditure to save $30 million. The company also intends to reduce its corporate real estate and halt all work related to “non-floorcare innovations,” which includes air purification, robotic lawn mowing (presumably referring to the paused Terra project), and education.
According to iRobot, the anticipated cost of restructuring ranges between $12 and $13 million, incurred primarily for severance payments and layoffs-related expenses. This is to be spread over the first two quarters of 2024, with the majority expected in Q1.
From the beginning, Amazon’s high-dollar iRobot deal faced regulatory scrutiny. Even as the United Kingdom ultimately approved the acquisition after initial hesitation, the European Commission initiated a more comprehensive investigation, and the U.S. Federal Trade Commission considered probing the potential impact of the deal on Amazon’s control over the smart home market and potential infringement of user privacy due to Amazon’s access to home data.
EU regulators raised concerns that Amazon might favour its own products and strategically reduce the visibility of other robotic vacuum cleaners on its platform, effectively shutting out competitors. Despite contemplating an appeal, Amazon decided against it after determining that the process would likely take several 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 established in 1990 by members of the MIT Artificial Intelligence Lab, Rodney Brooks, Angle, and Helen Greiner. In 2002, 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 has also been actively venturing into the robotics domain, taking gradual steps into the home with the release of Astro, a robot that has so far struggled to find acceptance among consumers.
Throughout the past several years, Amazon and iRobot have developed an increasingly close partnership, marked by Roomba’s integration of Alexa functionality and use of AWS servers. The retailer has consistently been iRobot’s largest customer, sometimes responsible for more than a quarter of sales.
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