Amazon and iRobot’s Merger Plans Collapse Under Regulatory Pressure

The much-discussed merger between Amazon, the biggest online retailer, and iRobot, a leading robot vacuum manufacturer, is no more. Regulatory hurdles indicate that their $1.4 billion business venture was untenable. Both EU and U.S. antitrust officials expressed concerns, putting the deal in a precarious position.

iRobot has now declared it will undergo a significant restructuring to cut down expenses. The setback has led to the elimination of 350 jobs, a whopping 31% of its workforce. Furthermore, Colin Angle, the founder of iRobot and Roomba robot vacuum producer, has resigned from his CEO role amid these challenging circumstances.

The proposed acquisition was stifled by the European Union’s regulatory watchdog. The preliminary investigation by EU antitrust chief Margrethe Vestager indicated the merger could potentially enable Amazon to edge out iRobot’s competitors by limiting their access to Amazon stores.

This merger could’ve allowed Amazon to delist its rival robot vacuum cleaners, lower their visibility, or increase their advertising and selling costs on Amazon’s marketplace. Such a move would particularly affect the markets in France, Germany, Italy, and Spain.

U.S. authorities were also ready to reject the deal. The Federal Trade Commission had planned to advise the commission to file a lawsuit to prevent this acquisition. However, the companies announced their decision to withdraw before the FTC could intervene.

Despite their significant investment in the smart home device market, including owning Alexa and Ring, Amazon’s attempt to expand via this acquisition did not bear fruit. The collapse has left the company visibly disappointed about the missed opportunity to grow in the consumer robotics sector.

Meanwhile, iRobot is bracing for a 25% revenue reduction in the 2023 fiscal year and expects to report a loss of between $265 and $285 million. As part of the merger agreement, Amazon will pay iRobot a $94 million termination fee.

This blow to Amazon follows its mixed record with competition regulators. It previously succeeded in acquiring healthcare provider One Medical and MGM’s movie library but now faces a lengthy court battle over accusations of profit-boosting via illegal strategies.

The merger’s failure has also had a significant impact on iRobot’s shares, while Amazon’s shares have seen a slight increase. Critics have expressed relief, arguing that the merger would have further empowered Amazon’s stronghold in the smart home devices market.