Amazon will pay $61 per share, valuing iRobot at a 22% premium to the stock’s last closing price of $49.99.
Shares of iRobot rose 19% in Friday trading to $59.66. At its peak during quarantine due to the COVID-19 pandemic, iRobot shares were more than twice as expensive as when hygiene-conscious consumers invested in premium vacuum cleaners.
The acquisition follows a vision that Amazon outlined in 2021. Senior Vice President Amazon Dave Limp told reporters: “We believe that in five to ten years every home will have at least one robot, which will become a major part of your daily life.”
iRobot CEO Colin Angle also said that homes should have a variety of devices that communicate seamlessly with each other and one day solve social problems such as caring for the elderly.
Amazon’s devices division makes up only a small portion of the company’s revenue, but the e-commerce giant is steadily expanding its lineup with more speakers showcasing the Alexa voice assistant, as well as ring doorbells and home security cameras it acquired in 2018.
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Ethan Glass, an antitrust expert at law firm Cooley LLP, said the US Federal Trade Commission would likely review the deal.
“I would say there is a three out of four chance of a thorough investigation and a one in four chance of being challenged,” he said. “Political appointees made it clear they would rather go to court and lose than allow a deal that was later criticized as anti-competitive.”
Amazon said it will continue to ship iRobot products to other retailers and maintain compatibility with other companies’ voice assistants.
In addition to sweeping dirt, Roomba vacuum cleaners under $1,000 collect spatial data about households that could be useful for future smart home technologies. One critic, Ron Knox of the Local Self-Sufficiency Institute, tweeted that the deal was a privacy “nightmare” because it would expand personal home information into the retailer’s arsenal.
Amazon said it protects customer privacy and does not sell their data. Among the information collected, one consumer found https://www.reuters.com/investigates/special-report/amazon-privacy-lobbying/#sidebar, records of everything they searched on Amazon, and more than 1,000 contacts. from his phone and which part of the Koran he listened to.
iRobot’s fortunes took a hit as consumers began to rethink their purchases amid rising inflation. The company’s second-quarter revenue fell 30% due to weak demand from retailers in North America and Europe, the Middle East and Africa.
The acquisition comes at a time when analysts expect cash-rich tech companies to actively engage in M&A to take advantage of low valuations due to growth pressures. Amazon currently has over $37 billion in cash and cash equivalents and announced a deal last month to buy primary care provider One Medical.
“It seems that (CEO) Andy Jassi is going to use M&A more than (predecessor) Jeff Bezos, and now it seems more logical to me that Amazon is bigger and has more money,” said DA Davidson analyst Thomas Forte.
If the deal does not go through, Amazon will be required to pay iRobot a $94 million termination fee. Engle will remain CEO of iRobot after the deal closes.