Amazon.com Inc. said it would buy IRobot Corp., maker of the Roomba vacuum, for $1.65 billion as the ecommerce giant continues its push into internet-connected home devices and robotics.
Amazon will pay $61 a share in cash for the Bedford, Massachusetts-based company, according to a statement on Friday. The offer, valued at $1.7 billion including debt, represents a premium of 22% based on iRobot’s last closing price before the announcement. Colin Angle will remain as chief executive officer of IRobot.
The Amazon deal arrives just two weeks after Amazon said it was buying up a chain of doctor’s offices and suggests Amazon is forging ahead with acquisitions despite growing scrutiny of Amazon’s market power from antitrust regulators in the U.S. and Europe.
Seattle-based Amazon has come a long way as a hardware player since a failed foray into smartphones a few years ago, working diligently to place the Alexa voice software and Echo smart speakers at the center of the burgeoning market for smart-home gadgets. Spoken Alexa commands can already control many other devices, from smart ovens to light bulbs and Roomba vacuums. The partnership between Amazon and IRobot extended beyond devices, too: IRobot runs some of its software on Amazon Web Services servers.
IRobot gives Amazon a household name in home cleaning gadgets that may give it a leg up over its own designs. Last fall, Amazon debuted a household robot that was supposed to usher in — or at least point to — a Jetsons-like future. Called the Astro, the three-wheeled device would eventually sell for about $1,450. But Astro, still in a limited rollout, hasn’t made a splash with consumers.
IRobot sales increased over the pandemic, as housebound families sought shortcuts to keep their homes clean. But like many pandemic-era darlings, iRobot has seen demand wane. It reported second-quarter revenue of $255.4 million on Friday, short of analysts’ expectations for $301 million. The company has also been battling JS Global Lifestyle Co. in a patent infringement case against its SharkNinja vacuums and hybrid vacuum-moppers. IRobot portrays itself as an American success story with a “passion for innovation” that’s been undercut by SharkNinja incorporating those inventions into its Chinese-made knockoffs.
IRobot says its Roomba vacuum and Braava floor mops “can map the floor of a home, sense changes in the floor type being cleaned, spot clean, avoid objects and cliffs (such as stairs), and intelligently approach a base station to recharge, among other innovative features.”
Amazon prefers to develop new technology internally, but its devices unit has been quick in recent years to pull the trigger on acquisitions that give the company a stake in a hot or adjacent market. Amazon grabbed a leading position in video doorbells with its 2018 deal to buy Ring, and acquired WiFi hub maker Eero the next year.
“I’m excited to work with the iRobot team to invent in ways that make customers’ lives easier and more enjoyable,” said Dave Limp, senior vice president of Amazon Devices.
Amazon deal with iRobot faces tough FTC antitrust review
Antitrust experts say the Amazon deal is expected to draw a tough review from the U.S. Federal Trade Commission led by Chair Lina Khan, a critic of the ecommerce platform’s market dominance. The agency will also review Amazon’s $3.49 billion deal last month to buy 1Life Healthcare, the parent of One Medical. The FTC didn’t challenge Amazon’s purchase of MGM Studios earlier this year, but that was before Khan had a Democratic majority on the commission.
Close scrutiny of Amazon’s iRobot transaction won’t necessarily result in a challenge, and even if the FTC does sue to block the deal, there’s a chance it wouldn’t prevail.
Hal Singer, managing director at Econ One, a litigation consulting firm, said the FTC could have a hard time winning a merger challenge on the deal.
“I want them to try and challenge these things, but I worry about their current evidentiary burden,” said Singer, who has served as an economics expert in antitrust cases. “Antitrust law has contorted itself where it’s largely feckless” in recent merger challenges where the companies weren’t direct competitors.
Khan has pushed the FTC to take a harder look at acquisitions by the biggest tech firms in the wake of a report by the agency last year that found Alphabet Inc.’s Google, Amazon, Apple Inc., Meta Platforms Inc. and Microsoft Corp. used loopholes to avoid antitrust scrutiny on hundreds of smaller deals. Last week, the agency sued to block Meta’s acquisition of virtual reality startup Within, the first time the FTC has preemptively sought to block a deal by the social networking giant.
iRobot’s Roomba dominates the smart vacuum market with a 75% market share by revenue in the U.S., according to industry database Statista. Amazon introduced its own offering last fall, a three-wheeled device called Astro, which sells for about $1,450. Astro, still in a limited rollout, hasn’t made a splash with consumers.
Amazon is “basically taking out their largest competition in a market they want to dominate,” said Sarah Miller, executive director of anti-monopoly advocacy group American Economic Liberties Project. “Buying what is your biggest competitor should be an antitrust violation.”
Beyond that, the deal also could have anticompetitive effects, said Amanda Lewis of the law firm Cuneo, Gilbert & LaDuca LLP.
The acquisition “would put Amazon in a position to disadvantage rivals on the platform and block access to important tools to reach new customers, like buying ads on Amazon.com,” said Lewis, who led the Amazon section of the 2020 congressional investigation into competition in online markets.
An Amazon spokesperson said Friday that the company would continue to supply retailers with iRobot products and sell competing devices on Amazon’s retail websites.
That promise may not be enough. The company made a similar pledge with its other major robotics deal — the 2012 acquisition of industrial bot builder Kiva Systems. Later Amazon stopped selling the devices to other companies, using them exclusively to supply its own warehouses.
The 2020 House probe found that Amazon has made significant investments into building out smart home systems based around its Alexa voice assistant. It’s acquired a number of companies with that aim, the report said, including the Ring smart security system in 2018 and a year later Eero, a router designed to make it easier for customers to set up smart home devices.
Adding iRobot’s Roomba to Amazon’s offerings alongside Alexa and Ring could lock-in consumers to the company’s smart home products, said Alex Harman, director of competition policy at the Economic Security Project.
“Once you have your whole house tied to one company, how can you justify the cost of switching?” he said.
The 2019 Eero acquisition may have helped Amazon decide to acquire iRobot by providing insights into how frequently and when consumers use their smart vacuums, said Stacy Mitchell, co-executive director of Institute for Local Self-Reliance. Amazon is using its data collection and acquisitions to help it dominate the smart home in the same way that it has e-commerce, she said.
“The smart home is going to become a powerful new platform that the Big Tech companies and Amazon in particular see as an opportunity to gain and exercise market power,” said Mitchell, who has studied Amazon for years. “Any other company that wants to participate in this arena is going to have to play according to Amazon’s rules.”
Miller from Economic Liberties noted that bipartisan legislation introduced in Congress would bar Amazon from this kind of acquisition.
“Congress really needs to act at this point,” she said. “The FTC cannot be the only one in the arena.”
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