Amazon has ended its bid to acquire robotic vacuum cleaner maker iRobot after facing tough headwinds with European regulators.
In a Press release, the companies said they see “no path to regulatory approval in the European Union,” preventing them from moving forward. Amazon and iRobot have mutually agreed to terminate their previously announced acquisition agreement, under which Amazon would have purchased iRobot for ~$1.7 billion in cash (or slightly less).
“We are disappointed that Amazon’s acquisition of iRobot could not proceed,” David Zapolsky, Amazon’s vice president and general counsel, said in a press release. “We believe 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 create together, and we are deeply grateful to everyone who worked tirelessly to try to make this partnership a reality.”
iRobot will receive a $94 million termination fee from Amazon as a result of the zero bid. However, the canceled acquisition will also require a “business restructuring plan,” iRobot said sayswhich involved laying off about 350 iRobot workers — about 31% of the company’s workforce — through the end of March.
This restructuring comes on top of iRobot’s cutbacks shortly after the acquisition deal was announced. In an effort to reduce its significant debt (excluding a $200 million debt round lifted up on July), iRobot cut the workforce twice — once in August 2022 and again in February 2023.
Bloomberg notes that iRobot had racked up about $500 million in net losses as of the second quarter of 2021. The publicly traded company, whose market capitalization now booths below $400 million, had an adjusted operating loss of about $200 million in 2023.
Colin Angle, chairman of the board and CEO of iRobot, stepped down as chairman and CEO, and Glen Weinstein, EVP and chief legal officer of iRobot, was named interim CEO. iRobot’s lead independent director of the board, Andrew Miller, was named chairman of the board, and iRobot hired a “turnaround expert,” Jeff Engel, to lead the implementation of the restructuring.
“iRobot is a powerful company and its mission remains to change the world by empowering people to do more,” Angle said in a LinkedIn post. Position. “It is home to talented builders, optimism, potential and unbridled determination and resilience. To those with whom I have shared this journey, I am forever grateful. I look forward to serving as a senior advisor and remaining on the board during my current term.”
iRobot aims to save $80 million to $100 million through renewed agreements with manufacturing partners on more attractive terms. $20 million through increased outsourcing. and $30 million consolidating sales and marketing spend. The company also plans to reduce its corporate real estate footprint and cease all work related to “non-floor care innovations,” including air purification, robotic lawn mowing (a possible reference to the Terra project with iRobot’s large shutter) and training.
iRobot expects the restructuring to cost between $12 million and $13 million, primarily for severance and severance-related costs, during the first two quarters of 2024, with the majority expected in the 1st quarter.
Amazon’s megabucks iRobot deal attracted regulatory scrutiny from the start. While the U.K. eventually approved the takeover after initial reluctance, the European Commission proceeded with a more in-depth investigation, while in the U.S., the Federal Trade Commission launched a formal investigation into how the deal could affect Amazon’s market influence of smart homes and potentially violate users’ privacy by giving the company access to data from their homes.
EU regulators raised concerns that Amazon would demote other robotic vacuum cleaners on its platform in favor of its own products and that the retailer would find it “economically profitable” to exclude competitors. Amazon considered an appeal, but ultimately decided to drop it after deciding the process would likely take years, according at Bloomberg.
iRobot was founded in 1990 by MIT Artificial Intelligence Lab members Angle, Rodney Brooks, and Helen Greiner. Twelve years after its founding, the company introduced Roomba, a brand that has since become synonymous with the category, selling more than 30 million units by 2020.
Amazon, too, is aggressively tackling the robotics space, taking baby steps at home with the release of Astro, a robot that has struggled to gain traction with consumers.
Amazon and iRobot have had an increasingly close partnership in recent years, through Roomba’s adoption of Alexa functionality and the use of AWS servers. The retailer has long been iRobot’s biggest customer, at times accounting for more than a quarter of sales.
Shares of iRobot fell about 16% in premarket trading in New York this morning.
