The European Union’s antitrust regulator intends to block Amazon’s $1.7 billion acquisition of iRobot, the maker of Roomba robotic vacuum cleaners, according to a Wall Street Journal report on Wednesday. Shares of iRobot plunged as much as 43% on the news.
EU Concerns Over Data and Market Domination
The EU Commission is concerned the deal would give Amazon too much market power and access to data about consumers’ homes. Amazon is already one of the world’s largest technology companies, and the EU wants to prevent it from becoming too dominant.
The EU gave Amazon a January 17 deadline to offer concessions to address antitrust concerns about the deal, but the company did not do so. That prompted EU regulators to start preparing a veto of the acquisition.
Margrethe Vestager, the EU’s competition commissioner, has said:
“If you have so much data with this company then of course you’ll be able to give suggestions for new innovations, new products that steal even more of the market.”
Background on the Acquisition
Amazon announced plans in August 2022 to acquire iRobot for $61 per share in an all-cash deal valued at approximately $1.7 billion. iRobot’s stock soared 19% on the news while Amazon’s stock barely moved.
iRobot is best known for its Roomba autonomous vacuum cleaners. The company brought in $1.6 billion in revenue in 2021 from selling vacuums and other home robots like the Braava robotic mop.
Amazon likely wanted to acquire iRobot to further build out its smart home ecosystem. Amazon already sells Echo smart speakers, Ring security cameras, and Eero WiFi routers. Adding Roombas to the mix would give Amazon an army of home robots providing data while also keeping customers locked into its ecosystem.
The deal quickly raised regulatory concerns about Amazon gaining too much market power and access to consumer data. Those concerns have now prompted EU regulators to prepare blocking the acquisition entirely.
Immediate Fallout of the Pending EU Veto
iRobot shares plunged as much as 43% to $35.90 on Wednesday following the report of the imminent EU veto. That’s far below the $61 per share Amazon agreed to pay to acquire the company. iRobot stock had already fallen leading up to the EU’s January 17 remedy deadline as it became less certain the deal would be approved.
If the EU Commission blocks the acquisition as expected, analysts say Amazon may walk away rather than contest the decision or propose new remedies. Amazon’s stock barely reacted to the news, falling just 0.4% as investors don’t view the relatively small acquisition as critical to Amazon’s future.
Colin Angle, CEO of iRobot, said in a statement:
“It’s unfortunate that the EU Commission is following a path diverging from antitrust enforcement precedents…While we will review the Commission’s decision once issued, based on the discretion given to the EU Commission’s discretion, I do not expect that we will be able to obtain an approval that adequately protects iRobot’s shareholders, consumers and European employees.”
What’s Next for Amazon and iRobot
While losing the iRobot deal is a setback for Amazon, analysts don’t expect it to derail the company’s Alexa-powered smart home efforts. Amazon will likely continue expanding Echo and other smart home devices while seeking alternate acquisitions.
Meanwhile, the outlook is now quite uncertain for iRobot. If the deal falls through, iRobot may struggle to find another suitor willing to acquire it at the price Amazon offered. That could leave the robotic vacuum maker attempting to power through as a standalone company amid increasing competition.
There are some analysts who see opportunity if iRobot remains independent, but competition has been intensifying. SharkNinja offers similar robotic vacuums at lower price points, pressuring iRobot’s margins. Not being part of Amazon would allow iRobot to integrate with other smart home platforms too, but growth may prove difficult without the extra resources a buyer like Amazon can provide.
The EU Commission is expected to formally announce its veto decision of Amazon’s iRobot acquisition in the coming weeks unless there is a last minute change. But Amazon missing the January 17 remedy deadline leaves little room for this blockbuster tech deal to be saved.
|Plunged up to 43%
|Still strong, continues smart home push
|Murky path ahead alone
In conclusion, the EU is preparing an imminent antitrust veto blocking Amazon’s $1.7 billion acquisition of iRobot. The regulators believe allowing one of the world’s largest tech companies to gain more power and data would be anti-competitive. This pending block of the deal has already punished iRobot’s stock while barely impacting Amazon. The outlook now appears difficult for iRobot to be acquired at a favorable price while Amazon is likely to continue its smart home expansion through other means. This story highlights the EV’s aggressive regulation preventing giant tech companies from becoming too dominant through acquisitions.
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