Amazon.com Inc (AMZN.O) will acquire iRobot Corp (IRBT.O), maker of the robotic vacuum cleaner Roomba, in an all-cash deal for about $1.7 billion in the latest push by the world’s largest online retailer to expand its stable of smart home devices.
Amazon will pay $61 per share, valuing iRobot at a premium of 22% to the stock’s last closing price of $49.99.
iRobot’s stock rose 19% in Friday trading to $59.66. At its peak during pandemic lockdowns, iRobot shares were more than twice that price as hygiene-conscious consumers invested in premium vacuum cleaners.
The acquisition follows through on a vision that Amazon outlined in 2021. Amazon Senior Vice President Dave Limp told reporters, “In five to 10 years, we believe every home will have at least one robot that will become a core part of your everyday life.”
iRobot CEO Colin Angle likewise has said homes should have myriad devices that seamlessly communicate with each other and one day address social challenges such as eldercare.
Amazon already has its virtual assistant Alexa; Ring, which it acquired to further home security; and a smart thermostat, giving it a range of products in the “internet of things” category, said Ethan Glass, an antitrust expert with law firm Cooley LLP.
Glass said the U.S. Federal Trade Commission, which is already investigating Amazon, would likely review the transaction.
“I would say there is a three out of four chance of a deep investigation and a one out of four chance of a challenge,” Glass said. “The political appointees have made clear that they would rather go to court and lose than let a deal through that later is criticized as anti-competitive, especially as they seek to change the laws.”
Amazon said it would continue to supply iRobot products to other retailers and keep them compatible with other companies’ voice assistants.
Devices make up a fraction of overall sales at Amazon. It recently launched a canine-like robot called Astro.
Besides sweeping up dirt, Roomba vacuums, costing as much as $1,000, collect spatial data on households that could prove valuable to companies developing smart home technology.
iRobot’s fortunes took a hit as consumers started rethinking how they spend their money amid rising inflation. Its second-quarter revenue fell 30% on weak demand from retailers in North America and Europe, Middle East and Africa.
The acquisition comes at a time analysts expect cash-rich technology companies to go on an M&A spree to take advantage of low valuations due to growth pressures. Amazon currently has cash and cash-equivalents of more than $37 billion and announced a deal last month to buy primary care provider One Medical
“It seems like (CEO) Andy Jassy is going to employ M&A more than (predecessor) Jeff Bezos and it makes more sense to me now that Amazon is bigger and has more cash,” said D.A. Davidson analyst Thomas Forte.
If the deal falls through, Amazon would be required to pay iRobot a $94 million termination fee. On completion of the deal, Angle would remain iRobot’s CEO.