iRobot announced Friday that it has entered into a definitive merger agreement with Amazon. The company, best known for the Roomba robotic vacuum, will be acquired for $61 a share, for an estimated $1.7 billion, including iRobot’s net debt, according to a press release.

Dave Limp, senior vice president of Amazon Devices, said, “Customers love iRobot products — and I’m excited to work with the iRobot team to invent in ways that make customers’ lives easier and more enjoyable.”

Who is iRobot?

iRobot was founded by Massachusetts Institute of Technology roboticists Colin Angle, Helen Greiner and Rodney Brooks in 1990. They worked on defense contracts, building robots for the military, and attempted to develop consumer robots for the home. In an interview with the New York Magazine, Angle, the company’s CEO, said “the original algorithm used by Roomba to make sure it got every part of your room clean was taken from mine-hunting algorithms we had developed for the military.”

In 2016, iRobot divested from its military offerings, spinning off Endeavour Robotics to work in the defense space, while iRobot continued selling consumer-level products. Their offerings include robot vacuums, mops, air purifiers and more. As of 2021, iRobot has sold over 40 million home robots worldwide, according to its website.

Their business has suffered in the past quarter, however, as its second-quarter earnings call reported a 30% drop in revenue from a year earlier. The drop has pushed the company to “shift certain noncore engineering functions to lower-cost regions,” blaming poor revenue performance on “unanticipated order reductions, delays and cancellations from retailers.”

If the deal goes through, Angle will remain CEO. He is looking to expand the company’s product offering, telling TechCrunch “we are working on nonfloor-cleaning robots. Interpret that as you will.”

Amazon’s aggressive expansion

CNBC reports the acquisition marks Amazon’s fourth-largest deal, “behind its $13.7 billion purchase of grocery chain Whole Foods in 2017, its $8.45 billion purchase of film studio MGM last year, and its $3.9 billion acquisition of boutique primary-care provider One Medical.”

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The U.S. Trade Commission has been deepening investigations into Amazon, especially as it relates to the acquisition of MGM, according to the LA Times. Ethan Glass, an antitrust expert with the law firm Cooley LLP, in an interview with Reuters, said “there is a three out of four chance of a deep investigation and a one out of four chance of a challenge.”

According to Glass, “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.”

What to watch

Reuters reports that iRobot’s shares rose 19% Friday morning to $59.56, though during the pandemic, “iRobot was trading at more than twice that price as hygiene-conscious consumers invested in premium vacuum cleaners.” Amazon’s stock was down less than 1%.

iRobot shareholders and regulatory bodies will have to approve the transaction, and if it falls through, Amazon must pay a $94 million termination fee.

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