The European Union’s antitrust regulator is planning to block Amazon’s proposed $1.7 billion acquisition of iRobot, maker of the popular Roomba robotic vacuum cleaners. The deal has faced scrutiny amid concerns over the e-commerce giant gaining more market power and access to consumer data.
Background of the Proposed Acquisition
In August 2022, Amazon announced an agreement to acquire iRobot in an all-cash deal valued at approximately $1.7 billion. iRobot is best known for its market-leading Roomba robotic vacuums and has sold millions of units globally.
Under the terms of the agreement, Amazon would pay $61 per share to acquire the outstanding common stock of iRobot, representing a significant premium over iRobot’s stock price at the time.
The deal would allow Amazon to add advanced home robotics technology to its list of smart home devices like Alexa. It was expected to close by the end of 2023 pending regulatory and shareholder approvals.
However, the acquisition immediately raised red flags for regulators in the EU and U.S. over concerns about Amazon gaining more power in the consumer IoT device market and access to trove of consumer data through iRobot devices placed inside homes.
|Facing regulatory scrutiny
EU Set to Formally Block the Deal
According to multiple reports this week, the European Commission is preparing an antitrust veto against Amazon’s planned acquisition of iRobot.
The EU regulator has set a provisional deadline of March 16th to either clear or block the deal. However, after reviewing concessions submitted by Amazon last week intended to assuage antitrust concerns, the regulator still plans to block the acquisition.
“The commission has told the companies about its intention to block the deal,” said a person familiar with the regulators review.
Without providing additional concessions, it appears unlikely Amazon will be able to gain approval for the iRobot deal in the EU.
Reasons for Scrutiny Over Data and Market Power
At the core of the regulatory pressure on the acquisition are concerns over consumer data and Amazon’s potential domination of the market.
Allowing Amazon to acquire iRobot would provide the tech and retail giant access to extremely valuable mapping and usage data from inside consumer’s homes generated by Roomba vacuums. Regulators have sought to block deals in the past over privacy issues stemming from consumer data changing hands.
There are also worries the deal would eliminate competition by allowing Amazon to corner the market in robotic home devices. iRobot currently holds a 75% market share for robotic vacuum cleaners in Europe. Letting Amazon subsume such a successful standalone company could discourage competition and innovation.
“This deal is dangerous for consumers and must be blocked,” said BEUC, an influential European consumer rights group, about the potential acquisition.
Without providing additional meaningful concessions, Amazon faces being the latest tech giant denied a major acquisition under tougher EU antitrust scrutiny.
What Happens Next?
With the EU regulator’s intention now clear, Amazon faces a critical decision on whether to walk away or fight for the deal.
If Amazon does not offer further concessions sufficient to ease antitrust worries before the March 16th deadline, the deal will likely face an outright ban by EU authorities.
Amazon could also choose to abandon its bid for iRobot given the regulatory headwinds. Just yesterday, Microsoft announced it would not pursue an acquisition of gaming chat service Discord after antitrust scrutiny made the prospects of getting a deal through unlikely.
However, Amazon may still try to fight for approval or offer additional concessions before fully giving up. Though time is quickly running out, and without a shift in regulators’ stated concerns, Amazon buying iRobot currently seems improbable.
If blocked, it would mark one of the most substantial deals stopped by EU antitrust regulators and a blow to Amazon’s smart home ambitions. Meanwhile for iRobot, its stock plummeted over 30% this week on reports of the regulator’s intention in a sign investors see little chance of the acquisition happening unless circumstances change.
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