- M&A
- August 6, 2022
- 5 minutes read
Tech Giant Amazon To Buy Roomba Vacuum Maker iRobot In $1.7B Deal
Amazon (NASDAQ: AMZN), the e-commerce giant, never slows down. Barely two weeks after agreeing to buy One Medical, a primary…
Amazon (NASDAQ: AMZN), the e-commerce giant, never slows down. Barely two weeks after agreeing to buy One Medical, a primary care provider, the company has signed another major acquisition agreement. The target is iRobot (NASDAQ: IRBT), a consumer robotics company best known for its Roomba robot vacuum cleaners.
- Amazon will pay $61 in cash per share of iRobot, a 22% premium to the company’s share price preceding the deal’s announcement. The total cash payment comes at $1.65bn. Including iRobot’s relatively tiny debt load that Amazon will absorb, the deal’s enterprise value sums up to $1.7bn.
Though best known for online retail, Amazon has its fingers dipped into many other places, including home automation products. The company’s lineup of smart speakers (often used in homes) currently dominates the market and its Ring brand of doorbell cameras is also a fixture in many homes.
Last year, Amazon unveiled its first home robot named Astro which cost $1000 apiece and has only shipped a few hundred units so far. It seemed like a test run for how the company planned to build a foothold in home robotics with more products to come. We can see the prediction being fulfilled with its agreement to buy iRobot. Instead of building products in-house and vying to compete with the incumbents, it can skip that step by buying an already established player.
- iRobot’s Roomba vacuum cleaner is a best-seller, though it’s facing increasing competition from similar products from Chinese companies like Xiaomi, Roborock, and Ecovacs. These companies have cornered a significant market share of the global robotic vacuum market in a relatively short time, though iRobot remains the dominant player.
- Neato, an American company; Dyson, a British company; and Panasonic from Japan are also up-and-coming competitors in the robotic vacuum market.
iRobot brought in $1.6bn in revenue in its last fiscal year (ended January 1, 2022), with around half from the US and the other half from international sales. The company reported a net profit of $30mn in the same period. Revenue growth wasn’t stellar (up 9% from the previous year) and profit slumped from $147mn in the previous year. Hence, it’s understandable that Amazon is paying barely 1x revenue multiple to buy iRobot.
- iRobot’s current CEO, Colin Angle, will remain in his role upon completion of the acquisition, leading the company as a division of Amazon, according to the agreed terms. Angle co-founded iRobot over three decades ago and has remained with the company ever since.
- This deal represents Amazon’s second major acquisition under the leadership of Andy Jassy, who took over the CEO role from founder Jeff Bezos in July of last year.
The acquisition is subject to customary closing conditions, including a shareholder vote and regulatory approval. It may see some pushback from the current leadership of the US Federal Trade Commission (FTC), which has increased scrutiny of big tech acquisitions.
The agency recently sued to block Facebook and Oculus owner Meta’s acquisition of Within, a virtual reality content company, asserting that the company “chose to buy market position instead of earning it on the merits.”
