Overview
Amazon and iRobot have decided not to proceed with their planned merger, which was initially announced in August 2022. This decision comes after the European Commission expressed concerns about potential preferential treatment of iRobot’s products on Amazon’s website, potentially harming competition. While the deal had previously received approval from UK regulators, the Federal Trade Commission was expected to reject it. The collapse of the merger is a significant setback for iRobot, known for its popular Roomba range of circular vacuum cleaners.
Disappointed Acquisition
Amazon’s senior vice president, David Zapolsky, expressed disappointment regarding the failed acquisition of iRobot. He stated that they believe in the future of consumer robotics in the home and have always been fans of iRobot’s products. Zapolsky also emphasized that this outcome would negatively impact consumers by denying them faster innovation and more competitive prices, which would have enhanced their lives.
Amazon’s Expansion Plans
Amazon, already a leader in smart home technology with products like Alexa and Ring, was looking to broaden its range of home tech devices through the merger. The termination of the deal has prompted iRobot to implement a restructuring plan aimed at reducing costs. This plan includes 350 job cuts, and the company’s founder, Colin Angle, has decided to step down as chief executive. Angle stated that he and the board mutually agreed that iRobot would benefit from new leadership with turnaround experience.
Termination Fee
While the merger may not have materialized, Amazon will still pay iRobot a previously agreed termination fee of $94 million (£74 million). This compensation helps to mitigate some of the financial impact on iRobot resulting from the abandoned merger.
Competition Approval and Market Size
The UK’s Competition and Markets Authority had approved the deal in June, highlighting the relatively small market for robot vacuum cleaners in the country. They acknowledged that demand for such products in Britain was significantly lower compared to mainland Europe and the US. The regulator also determined that although Amazon had the capability to harm iRobot’s competitors through its website, it lacked the incentive to do so. The decision to abandon the merger reflects concerns about potential anti-competitive practices and the desire to maintain a fair marketplace. Both Amazon and iRobot will now navigate their paths forward independently.