By
Bena Ilyas
May 13th, 2024
As the value of the deal has been reduced, iRobot has turned to the private credit industry to shore up its finances. In particular, iRobot has secured a $200 million loan from global investment firm Carlyle.
Amazon.com Inc (NASDAQ: AMZN) has cut the price of the merger deal with a leading global consumer robot company iRobot Corporation (NASDAQ: IRBT) by 15%. Instead of acquiring iRobot for 1.7 billion (or $61.00 per share), Amazon will pay about $1.4 billion, or $51.75.
Amazon and iRobot Deal
Amazon announced its intention to acquire of iRobot in an all-cash transaction back in August 2022. For the e-commerce giant, the deal would help expand its presence in the market for consumer robotics. However, the acquisition faced scrutiny from the US and EU regulators. The reason is that the deal could violate the rules of competition.
European Union regulators have opened an official investigation into Amazon’s acquisition of iRobot, stating that “the transaction would allow Amazon to restrict competition in the market for robot vacuum cleaners (‘RVCs’) and to strengthen its position as online marketplace provider”. Meanwhile, in the US, the Federal Trade Commission raised concerns about Amazon’s growing power and increasing dominance in the smart home market.
UK’s Competition and Markets Authority was also investigating the terms of the acquisition, considering if it would result in a “substantial lessening of competition” in the UK market. Only last month, they gave the green light for the deal.
Some observers have even asked regulators to halt the deal. For example, Ron Knox, a senior researcher at the Institute for Local Self-Reliance, referred to the deal as the “most dangerous, threatening” acquisition in the e-commerce behemoth’s history.
Amid all this antitrust scrutiny, Amazon had to cut the price of the acquisition.
iRobot Taking a Loan
As the value of the deal has been reduced, iRobot has turned to the private credit industry to shore up its finances. In particular, iRobot has secured a $200 million loan from global investment firm Carlyle (NASDAQ: CG).
Colin Angle, CEO of iRobot, commented:
“We’ve reached an amended agreement with Amazon that reflects the incurrence of iRobot’s new debt. iRobot is taking on new financing that we believe is sufficient to support our operations in a hyper-competitive environment and meet our liquidity needs as well as pay off iRobot’s existing debt. This new financing is the outcome of a thorough process and represents the best terms reasonably obtainable on additional financing to support our operations.”
Dave Limp, SVP of Amazon Device, stated:
“We are pleased to support iRobot in this way so they can continue inventing and delivering for customers while our proposed acquisition awaits regulatory approval. As we said when we announced the merger last August, customers love iRobot products and we’re excited to work with them to invent in ways that make customers’ lives easier and more enjoyable.”
Notably, to protect itself if the deal is blocked by regulators, Carlyle has required iRobot to pay off up to $75 million of the whole loan. In this case, iRobot will have to use the vast majority of the $94 million termination fee that Amazon has agreed to pay.