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In a surprising turn of events, Amazon announced on Monday that it would no longer pursue the planned $1.7 billion acquisition of vacuum-maker iRobot. The decision comes as the two companies cited “no path to regulatory approval for the deal.” Alongside this development, iRobot disclosed that it would initiate a significant workforce reduction, laying off 31% of its employees, approximately 350 people. Additionally, Colin Angle, the chair and CEO of iRobot, would step down from his position with immediate effect.
The uncertainty surrounding the deal escalated when The Wall Street Journal reported that the European Union (EU) would not grant regulatory approval. The European Commission had initiated a probe in July, expressing concerns that Amazon’s acquisition of iRobot could lead to anticompetitive practices. The commission feared that Amazon might hinder iRobot’s rivals from competing on its online marketplace by delisting or reducing the prominence of rival products in search results.
Margrethe Vestager, the European Commission’s executive vice president, stated that the in-depth investigation revealed that the acquisition could have allowed Amazon to foreclose iRobot’s rivals, potentially restricting access to Amazon Stores. Vestager emphasized that such control by Amazon could result in reduced competition in the robot vacuum cleaner market, leading to higher prices, lower quality, and less innovation for consumers.
David Zapolsky, Senior Vice President and General Counsel at Amazon, expressed disappointment over the deal’s termination. Amazon will pay iRobot a previously agreed-upon $94 million breakup fee. The termination marks the end of a deal first announced in 2022, originally valuing iRobot at approximately $1.7 billion.
Following the breakdown of the deal, iRobot unveiled its plans to focus on margin improvements, reduce spending on research and development, and halt work on “non-floorcare” products, including air purifiers and robotic lawn mowers. Despite the setback, iRobot aims to continue building innovative robots and intelligent home solutions.
The terminated deal casts a shadow over iRobot, which currently has a market capitalization of under $400 million, significantly lower than the deal’s initial valuation. In July, iRobot secured a $200 million financing facility from the Carlyle Group to fund its operations as a temporary measure until the Amazon deal concluded.
Regulators globally have heightened scrutiny of large technology companies, investigating potential anti-competitive effects. Amazon, in particular, faces scrutiny as regulators, including the Federal Trade Commission, examine investments and partnerships between major tech firms and AI developers. The regulatory landscape has led to delays and cancellations of various deals in Europe, affecting companies like Meta, Adobe, and Microsoft.