Alexa! Start my Roomba: Amazon buys robot vacuum maker for $1.7 billion

Amazon.com Inc. will acquire iRobot Corp, maker of the robotic vacuum cleaner Roomba, in a cash deal worth about $1.7 billion in the latest push by the world’s largest online retailer for its steady expansion of smart home devices.

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Amazon will pay $61 per share, valuing iRobot at a premium of 22% to the stock’s final closing price of $49.99.

Shares of iRobot rose 19% to $59.56 in early trading Friday. At its peak during the pandemic lockdown, iRobot was trading at more than double the price that hygiene-conscious consumers had invested in premium vacuum cleaners.

Amazon already owns the virtual assistant Alexa, Ring, which monitors homes, and a smart thermostat, giving it a range of products in the “Internet of Things” category, according to Ethan Glass, an antitrust of law firm Cooley LLP. said the expert.

He said the US Federal Trade Commission, which is already investigating Amazon, would review the transaction.

“I would say there is a three in four chance of a deeper investigation and a one in four chance of a challenge,” he said. “Political appointees have made it clear that they would rather lose than go to court and later be criticized as anti-competitive, especially when they seek to change the laws.”

Charlotte Sleman of Public Knowledge said that antitrust enforcers now see the risk of under-enforcement as an issue rather than just over-enforcement. “The cost of inaction is much higher than antitrust experts think,” she said.

In addition to cleaning up the mess, Roomba vacuums, which cost $1,000, collect spatial data on homes that could prove valuable to companies developing smart home technology.

But iRobot’s fortunes took a toll as consumers began to rethink how they spend their money amid rising inflation. Its second-quarter revenue declined 30% due to weak demand from retailers in North America and Europe, the Middle East and Africa.

The deal comes at a time when analysts expect cash-rich technology companies to embark on an M&A spree to take advantage of lower valuations due to growth pressures. Amazon currently has more than $37 billion in cash and cash-equivalents.

Devices make up a fraction of total sales at Amazon, but include smart thermostats, security devices, and it recently launched a dog-like robot called Astro.

DA Davidson analyst Thomas Forte said, “It looks like (CEO) Andy Jesse is going to hire more M&A than (predecessor) Jeff Bezos and it makes more sense to me now that Amazon is bigger and bigger.” There’s more cash.”

If the deal fails, Amazon will have to pay iRobot a $94 million termination fee. Upon completion of the deal, Colin Angle will remain as chief executive of iRobot.