Amazon and iRobot Scrap $1.4 Billion Merger Deal Amid Regulatory Roadblocks

Highlights

• Amazon and iRobot scrap $1.4 billion merger plans due to EU and U.S. antitrust opposition.
• iRobot announces major restructuring, cutting 31% of its workforce; founder Colin Angle steps down as CEO.
• EU antitrust concerns suggest Amazon could limit rivals’ access to its online marketplace.
• European Commission was set to block the deal, citing potential negative impacts on iRobot’s competitors.
• Federal Trade Commission (FTC) in the U.S. was ready to reject the deal before its abandonment.
• Amazon’s David Zapolsky expresses disappointment; iRobot to receive a $94 million termination fee.
• iRobot anticipates a 25% reduction in 2023 revenue ($891 million) and expects a loss between $265 and $285 million.
• iRobot shares fall by 7.2%, while Amazon shares rise by nearly 1%.
• Critics fear the deal would strengthen Amazon’s position in the smart home devices market.
• Abandoned merger underscores challenges in navigating complex antitrust landscapes.

In a surprising move, Amazon and iRobot have decided to call off their planned $1.4 billion merger due to opposition from both EU and U.S. antitrust regulators. The decision follows revelations that the deal faced insurmountable challenges in gaining approval, leading to significant developments for both companies.

iRobot, the parent company of the popular Roomba robot vacuum, announced a substantial restructuring plan aimed at cutting costs. As part of this plan, approximately 31% of its workforce, equivalent to 350 jobs, will be eliminated. Additionally, founder Colin Angle has stepped down as the CEO of iRobot, with the decision being a mutual one based on the current challenges faced by the company.

Amazon’s proposed acquisition of iRobot encountered regulatory roadblocks, particularly in the European Union. EU antitrust chief Margrethe Vestager stated that their investigation preliminarily indicated that the acquisition would have given Amazon the power to limit or degrade access to its online marketplace for iRobot’s rivals.

Earlier this month, reports from Reuters suggested that European Commission antitrust regulators were poised to block the deal, expressing concerns that Amazon could negatively impact iRobot’s competitors on its online marketplace, especially in key European markets.

Simultaneously, the Federal Trade Commission (FTC) in the U.S. was on the verge of rejecting the deal. Insider sources revealed that the FTC staff had informed Amazon of their intention to recommend blocking the acquisition, prompting a final meeting scheduled for Monday before a potential legal challenge.

David Zapolsky, Amazon’s general counsel, expressed disappointment over the deal’s dissolution, emphasizing Amazon’s belief in the future of consumer robotics and its admiration for iRobot’s products. As per the terms of the terminated merger agreement, Amazon will pay iRobot a $94 million termination fee.

iRobot expects to report a 25% reduction in full-year 2023 revenue, amounting to $891 million, with an anticipated loss between $265 and $285 million. Since reports of potential EU regulatory blockage two weeks ago, iRobot shares have fallen by half, and Amazon shares rose nearly 1%.

Critics who opposed the deal expressed concerns about strengthening Amazon’s already dominant position in the smart home devices market. The abandoned merger underscores the complexities and challenges that even tech giants face in navigating intricate antitrust landscapes.