By David Shepardson
WASHINGTON (Reuters) -Amazon and robot vacuum maker iRobot said Monday they would end their plans to merge in the face of opposition from EU and U.S. antitrust regulators.
iRobot announced a significant restructuring plan to reduce costs and said it would cut about 31% of its workforce, or 350 jobs. The company also said founder Colin Angle has stepped down as its CEO of the Roomba robot vacuum manufacturer.
Angle said given the current challenges, he and the board “mutually decided that iRobot will be better served by a new leader with turnaround experience.”
Amazon said its proposed $1.4 billion acquisition of iRobot had no path to regulatory approval in the European Union.
EU antitrust chief Margrethe Vestager said Monday its in-depth investigation preliminarily showed “the acquisition of iRobot would have enabled Amazon to foreclose iRobot’s rivals by restricting or degrading access to Amazon stores.”
Reuters reported earlier this month the deal would be blocked by European Commission antitrust regulators and that its main concerns were that Amazon could thwart iRobot rivals on its online marketplace, especially in France, Germany, Italy, and Spain.
Amazon could have delisted rival robot vacuum cleaners, reduce visibility of rivals or raised costs of iRobot’s rivals to advertise and sell their robot vacuum cleaners on Amazon’s marketplace, Vestager added.
Separately, the Federal Trade Commission was poised to reject Amazon’s deal before the companies announced they were abandoning it, a source told Reuters.
The FTC staff met with Amazon last week to inform them they planned to recommend the commission vote to sue to block the acquisition, the source added, saying the commission was set to hold a final meeting on Monday with Amazon before the commission could have voted to approve a legal challenge to the merger.
Amazon announced the deal in August 2022. The world’s largest online retailer, which already owns Alexa and Ring, was pushing to expand its stable of smart home devices as well as expanding the e-commerce giant’s virtual healthcare.
“We’re disappointed that Amazon’s acquisition of iRobot could not proceed,” said David Zapolsky, Amazon’s general counsel. “We’re believers in the future of consumer robotics in the home and have always been fans of iRobot’s products,” he added in a statement.
Bedford, Massachusetts-based iRobot said it expects to report full-year 2023 revenue of $891 million, a 25% reduction and a loss of between $265 and $285 million. Under the terms of the merger agreement, Amazon will pay iRobot a $94 million termination fee.
Amazon has had a mixed record with competition regulators in recent years, completing a deal for healthcare provider One Medical and MGM’s movie library.
But it faces a lengthy court battle in a Seattle federal court with the FTC over accusations the company uses illegal strategies to boost profits at its online retail empire, including an algorithm that allegedly pushed up prices by more than $1 billion.
iRobot shares fell 7.2% in afternoon trading Monday. Since first reports the deal might be blocked by EU regulators two weeks ago, iRobot shares have fallen by half. Amazon shares rose nearly 1%.
Critics opposed the deal, saying it would strengthen Amazon’s already powerful position in smart home devices.
(Reporting by David Shepardson; Editing by Chizu Nomiyama)
