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Alexa! Start my Roomba: Amazon buys a robot vacuum cleaner for 1.7 billion dollars

Aug 5 (Reuters) – Inc (AMZN.O) is to acquire iRobot Corp (IRBT.O), maker of the Roomba robotic vacuum cleaner, in a cash deal worth around $1.7 billion. dollars in the world’s largest online retailer’s latest push to expand its stable of smart home devices.

Amazon will pay $61 per share, valuing iRobot at a 22% premium to the stock’s last closing price of $49.99.

iRobot’s stock rose 19% on Friday to $59.66. At its height during the COVID-19 pandemic lockdowns, iRobot’s stock was more than double that price as hygiene-conscious consumers invested in high-end vacuum cleaners.

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The acquisition follows a vision Amazon outlined in 2021. Amazon senior vice president Dave Limp told reporters, “In five to 10 years, we believe every home will have at least one robot which will become a central part of your daily life.”

iRobot chief executive Colin Angle also said homes should have a myriad of devices that communicate seamlessly with each other and one day address social challenges such as elderly care.

Amazon’s device unit accounts for just a fraction of the company’s revenue, but the e-commerce giant has steadily expanded its lineup with more speakers showcasing its voice assistant Alexa and with doorbells and home security cameras from Ring, which he acquired in 2018.

Ethan Glass, an antitrust expert with the law firm Cooley LLP, said the US Federal Trade Commission would likely review the transaction.

“I would say there’s a three in four chance of a thorough investigation and a one in four chance of a challenge,” he said. “Politicians have made it clear that they would rather go to court and lose than let a deal go through that will then be criticized as anti-competitive.”

Amazon said it would continue to provide iRobot products to other retailers and keep them compatible with voice assistants from other companies.

In addition to sweeping up dirt, Roomba vacuums, which cost up to $1,000, collect household spatial data that could prove valuable for future smart home technology. One critic, Ron Knox of the Institute for Local Self-Reliance, on Twitter called the deal a “privacy nightmare” because it would expand personal home information in the retailer’s arsenal.

Amazon said it protects customers’ privacy and does not sell their data. Among the information he collects, a consumer found records of everything he searched for on Amazon, as well as more than 1,000 contacts from his phone and which part of the Quran he listened to.

iRobot’s fortunes took a hit as consumers began to rethink their purchases amid rising inflation. Its 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 technology companies to embark on a merger and acquisition spree to take advantage of low valuations due to growth pressures. Amazon currently has more than $37 billion in cash and cash equivalents and last month announced a deal to buy primary care provider One Medical . Read more

“It looks like (CEO) Andy Jassy is going to employ more mergers and acquisitions than (predecessor) Jeff Bezos and that makes more sense to me now that Amazon is bigger and has more money,” said Thomas Forte, DA Davidson analyst.

If the deal fails, Amazon will have to pay iRobot a $94 million termination fee. Angle would remain iRobot’s CEO upon closing of the deal.

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Reporting by Akash Sriram and Nivedita Balu in Bengaluru; Additional reporting by Diane Bartz in Washington and Jeffrey Dastin in Palo Alto, Calif.; Editing by Arun Koyyur, Mark Potter, Will Dunham and Marguerita Choy

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