Why Amazon throws in the towel on the purchase of iRobot
Amazon renounces the iRobot acquisition, an operation that came under the scrutiny of the EU Antitrust, and the manufacturer of the Roomba robot vacuum cleaner lays off 31% of its staff. All the details
No Roomba robot vacuum cleaner in the Amazon shopping cart.
The e-commerce giant announced it was abandoning its $1.4 billion acquisition of iRobot, which makes the Roomba robot. The two companies, in a statement, declared that "there is no possibility of approval from the authorities".
At the same time, 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 that Colin Angle has resigned as CEO. On the news, iRobot shares dropped 15% in the premarket.
Additionally, Amazon will pay a penalty of $94 million to iRobot. Less than three weeks ago, Amazon missed its deadline to offer responses to the European Union. “The European Commission has informed Amazon of its preliminary opinion that its proposed acquisition of iRobot could limit competition in the market for robot vacuum cleaners,” Brussels announced last November.
All the details.
THE STRATEGY OF THE E-COMMERCE GIANT
It was August 2022 when the e-commerce giant founded by Jeff Bezos announced the agreement with iRobot. The world's largest online retailer, which already owns Alexa and Ring, was pushing to expand its stable of smart home devices and to expand the e-commerce giant's virtual healthcare, Reuters recalls.
The acquisition would have allowed Amazon to invest in iRobot and help it “reduce prices on products that customers already value,” according to the company.
The deal originally valued the Roomba company at $1.7 billion, but a series of regulatory scrutiny first lowered the purchase price before leading the two companies to ultimately cancel the deal.
HAMMERED BY EU REGULATORS
Amazon said its proposed acquisition of iRobot had no path to regulatory approval in the European Union. Reuters reported in early January that the deal would be blocked by the European Commission's antitrust regulators and that its main concerns were that Amazon could counter iRobot's rivals on its online marketplace, particularly in France, Germany, Italy and Spain.
AMAZON'S POSITION ON GIVING UP IROBOT
Amazon Vice President and General Counsel David Zapolsky says he is "disappointed that Amazon's acquisition of iRobot could not proceed." “Undue and disproportionate regulatory barriers – he adds – discourage entrepreneurs, who should be able to see the acquisition as a path to success, and this harms both consumers and competition, exactly the things regulators say they are trying to do to protect".
CONTRASTING OPINIONS ON THE OPERATION
While critics immediately opposed the deal, saying it would strengthen Amazon.com's already powerful position in smart home devices, there were also those who supported it.
For the head of the industrial association. Computer & Communications Industry Association Daniel Friedlaender, “a company's size or profitability should not be used as an excuse by EU regulators to argue that it cannot innovate in a completely different sector. In this case, for example, there are simply no valid reasons to prevent a company from acquiring a struggling appliance manufacturer,” reports Adnkronos .
“If Europe – continues Friedlaender – adopts a fusion policy driven by political objectives that only serve industrial policy, rather than a competitive market, this will ultimately lead to less competition and less innovation in the EU. It is bad for consumers and for European industry. It sends the wrong message to both global investors and EU start-ups: as soon as you reach a certain size, you can forget about future mergers and acquisitions. Europe cannot and must not create an environment where companies are not allowed to invest in or acquire companies in related sectors. Neither the Competition Act nor the Digital Markets Act should be used to artificially limit or restrict healthy markets or legitimate acquisitions,” he concluded.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/perche-amazon-getta-la-spugna-sullacquisto-di-irobot/ on Mon, 29 Jan 2024 15:02:40 +0000.