Amazon and iRobot Terminate $1.7 Billion Acquisition Deal, Leading to Layoffs and Regulatory Concerns
In a surprising turn of events, Amazon and iRobot have mutually called off their anticipated $1.7 billion acquisition deal, citing various regulatory obstacles. Following this announcement on Monday, iRobot disclosed plans to lay off 31% of its workforce, amounting to around 350 employees. Founder Colin Angle will step down as CEO, with Glen Weinstein appointed as interim CEO, emphasizing a focus on profitability, stability, and growth.
Shares of iRobot (IRBT) experienced a decline of approximately 9% in noon trading after the news broke. Amazon (AMZN), on the other hand, saw a marginal increase of about 0.5% in noon trading. As part of the termination agreement, Amazon will pay iRobot a pre-arranged cancellation fee of $94 million.
iRobot’s restructuring plan, aimed at saving up to $150 million, was outlined in a joint statement by the two companies. Further details on iRobot’s future business plans are expected to be provided during its fourth-quarter earnings call in February.
While the Federal Trade Commission (FTC) was initially perceived as a potential obstacle to the acquisition, the ultimate reason for its demise, according to the companies, was “no path to regulatory approval” in the European Union. The European Commission expressed alignment with its findings that the sale could have posed a risk to iRobot’s competitors.
The deal, first announced in August 2022, faced scrutiny from regulators domestically and abroad. The European Commission, in November, voiced concerns about potential competition issues in the robot vacuum sector. Despite a provisional deadline set for an EU decision on February 14th, the companies decided to withdraw before reaching that point.
Amazon’s attempt to acquire iRobot aimed to enhance its robotics lineup and solidify its presence in consumer homes, particularly with the Roomba vacuum maker. Regulatory challenges, including scrutiny from the FTC and European authorities, have plagued the deal. The changing regulatory landscape, particularly under the leadership of FTC Chair Lina Khan, signals increased scrutiny of big tech monopolies.
Similar challenges have been faced by other tech giants in Europe, with Adobe abandoning its deal with Figma and Nvidia withdrawing plans to acquire Arm due to significant regulatory hurdles. Microsoft’s purchase of Activision Blizzard also faced regulatory scrutiny, highlighting an emerging trend of increased regulatory challenges for major tech acquisitions in Europe.
