Amazon’s connected device cart expands with $1.7 billion deal for Roomba maker

August 5 (Reuters) – Inc. (AMZN.O) will acquire iRobot Corp (IRBT.O)maker of the Roomba robotic vacuum cleaner in a cash deal worth around $1.7 billion in the world’s biggest online retailer’s latest attempt to expand its stable of devices smart home.

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

Shares of iRobot were up 19% in early Friday trading at $59.56. At its peak during pandemic shutdowns, iRobot traded at more than double that price as hygiene-conscious consumers invested in high-end vacuums.

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Amazon already has virtual assistant Alexa, Ring, which monitors homes, and a smart thermostat, giving it a range of products in the ‘Internet of Things’ category, said Ethan Glass, an antitrust expert at law firm Cooley. LLP.

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

“I would say there’s a three in four chance of a thorough investigation and a one in four chance of a challenge,” he said. “Politicians have made it clear that they would rather go to court and lose than let a deal go through that will then be criticized as anti-competitive, especially as they seek to change the laws.”

Charlotte Slaiman of Public Knowledge added that antitrust authorities now see the risk of under-enforcement as a problem rather than just over-enforcement. “The costs of inaction are much higher than antitrust experts thought,” she said.

In addition to sweeping up dirt, Roomba vacuums that cost up to $1,000 collect household spatial data that could prove valuable to companies developing smart home technology.

But iRobot’s fortunes took a hit when consumers began to rethink how they spend their money amid rising inflation. Its second-quarter revenue fell 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 tech companies to embark on a merger and acquisition spree to take advantage of low valuations due to growth pressures. Amazon currently has more than $37 billion in cash and near cash.

The devices make up a fraction of Amazon’s overall sales, but include smart thermostats, security devices and it recently launched a dog-like robot called Astro.

“It looks like (CEO) Andy Jassy is going to employ more mergers and acquisitions than (predecessor) Jeff Bezos and that makes more sense to me now that Amazon is bigger and has more money,” said Thomas Forte, DA Davidson analyst.

If the deal fails, Amazon will have to pay iRobot a $94 million termination fee. At the end of the agreement, Colin Angle would remain iRobot’s general manager.

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Reporting by Akash Sriram and Nivedita Balu in Bengaluru Additional reporting by Diane Bartz in Washington Editing by Arun Koyyur and Mark Potter

Our standards: The Thomson Reuters Trust Principles.

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