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In brief: Amazon and iRobot have agreed to dissolve their previously announced acquisition agreement that would have seen the e-commerce giant purchase the Roomba maker for $1.7 billion in cash, which worked out to $61 per share or a 22 percent premium.
Amazon, if you recall, agreed to purchase iRobot in the summer of 2022. At the time, it would have been the company's fourth largest acquisition. The deal would have helped Amazon build out its smart home portfolio alongside similar ventures like Alexa, Ring, and Astro.
The deal is now off the table, marking the first time Amazon has been stopped from completing an acquisition. But, what went wrong? Regulatory hurdles, as Amazon said it did not see a path to regulatory approval in the European Union.
Amazon SVP and General Counsel David Zapolsky said mergers and acquisitions like this help companies better compete in the global marketplace, especially against those in other countries that are not subject to strict regulatory requirements. "Undue and disproportionate regulatory hurdles discourage entrepreneurs," Zapolsky added, which hurts both consumers and competition.
The deal would have also helped lower prices on Roomba products, we are told, which are often more expensive compared to similar products from competitors.
The Wall Street Journal reported earlier this month that the EU's competition watchdog planned to block the merger. In a meeting with company representatives, competition officials said the deal would likely be rejected.
Margrethe Vestager, the European Commission's executive vice president, said their investigation determined that the acquisition of iRobot would "enable Amazon to foreclose iRobot's rivals by restricting or degrading access to the Amazon Stores." As an example, Vestager said Amazon would have been in a position to not list competing robot vacuum cleaners in its store or reduce their visibility, or increase the advertising cost for rivals.
Shares in iRobot are down nearly 10 percent on the news, their lowest in almost 15 years. Amazon's stock has held steady in early morning trading as of this writing. Amazon will pay iRobot a previously agreed upon termination fee, reportedly in the ballpark of $94 million.
Image credit: Denny Muller