Amazon will acquire iRobot, maker of Roomba, in an all-cash deal for $1.7 billion in the latest push by the world's largest online retailer to expand its line of smart home devices.
Amazon will pay $61 per share, valuing iRobot at a premium of 22 per cent over the stock's last closing price of US $49.99.
iRobot's stock rose 19 per cent to $59.66 on Friday. At its peak during the Pandemic lockdowns, iRobot shares were more than twice that price as hygiene-conscious consumers invested in premium vacuum cleaners.
The vision that Amazon outlined in 2021 was followed by the acquisition. In the past five to 10 years, we believe that every home will have at least one robot that will be a core part of your everyday life. iRobot CEO Colin Angle said that homes should have myriad devices that communicate with each other and address social challenges such as eldercare.
Amazon already has its virtual assistant Alexa, Ring, which it acquired to further home security and a smart thermostat, giving it a range of products in the category of internet of things, said Ethan Glass, an antitrust expert with law firm Cooley LLP.
Glass said that the US Federal Trade Commission, which is already investigating Amazon, would review the transaction.
Glass said there was a three out of four chance of a deep investigation and a one out of four chance of a challenge. The political appointees have made clear that they would rather go to court and lose rather than let a deal go through that later is criticized as anti-competitive, especially as they try to change the laws. Amazon said it would continue to supply iRobot products to other retailers and keep them compatible with other companies' voice assistants.
Devices make up a fraction of the total sales at Amazon. It recently launched a canine-like robot called Astro.
Roomba vacuums, costing as much as $1,000, collect spatial data on households that could prove valuable to companies developing smart home technology, as well as sweeping up dirt.
iRobot's fortunes took a hit as consumers began rethinking how they spend their money amid rising inflation. In the second quarter, revenue fell 30 per cent due to weak demand from retailers in North America and Europe, Middle East and Africa.
The acquisition comes at a time when analysts expect cash-rich technology companies to go on an M&A spree to take advantage of low valuations due to growth pressures. Amazon has cash and cash equivalents of more than $37 billion and announced a deal last month to buy primary care provider One Medical.
It seems that CEO Andy Jassy is going to employ M&A more than his predecessor Jeff Bezos, and it makes sense now that Amazon is bigger and has more cash, said Thomas Forte, analyst for DA Davidson.
If the deal falls through, Amazon would have to pay a US $94 million termination fee. Angle would be iRobot's CEO upon completion of the deal.