The European Union's competition watchdog is set to reject Amazon's ambitious $1.7 billion bid to acquire iRobot, the manufacturer of the popular Roomba robotic vacuum.
Sources familiar with the matter disclose that competition officials from the European Commission, the executive body of the EU, engaged in discussions with Amazon representatives on Thursday regarding the proposed deal.
During the meeting, Amazon was reportedly notified that the acquisition was likely to face rejection. Despite these developments, Amazon has chosen not to comment on the unfolding situation. Following the revelation, shares of iRobot experienced a drastic 40% decline, plummeting to $14 after the market closed.
The European Commission met with Amazon's representatives last Thursday to deliberate on the acquisition, according to reports. The tech behemoth failed to provide any remedies to the European Union's antitrust regulator until the January 10 deadline, designed to address concerns about potential competition reduction and the reinforcement of Amazon's dominance in the e-commerce sector.
A report from The Wall Street Journal (WSJ) cited unnamed sources, indicating that Amazon was apprised of the probable rejection during the meeting with European Commission officials. Amazon, once again, declined to comment on the WSJ report.
Matt Schruers, President of the Computer and Communications Industry Association, a tech lobbying group, expressed skepticism regarding the potential rejection. "If the objective is to have more competition in the home robotics sector, this makes no sense," Schruers remarked. He emphasized that blocking the deal could limit consumer options, urging regulators to consider this aspect seriously.
Amazon had announced its intent to acquire iRobot in August 2022, aiming to enhance its portfolio of smart devices, including the Alexa voice assistant, smart thermostats, security devices, and wall-mounted smart displays. The European Commission, serving as the EU's competition watchdog, had until February 14 to either approve or reject the proposed acquisition.
Simultaneously, iRobot's stock witnessed a significant post-market trading decrease of 32%, reaching $15.83. This followed a prior dip to a 10-year low of $23.62 at the market close on Thursday. In contrast, Amazon's shares remained relatively stable, maintaining a flat position compared to the market close, according to New York Post.
EU Commission Officials to Discuss iRobot Deal
The WSJ reported that Amazon representatives met with European Commission officials on Thursday to discuss the deal, learning during the meeting that rejection was probable. This comes after Amazon failed to meet the deadline last week for offering remedies to address the European Union's concerns about the acquisition potentially stifling competition in the robot vacuum cleaner market.
The plan to reject the deal requires formal approval from the commission's 27 top political leaders before a final decision can be issued. Nevertheless, historical precedence suggests that this process is unlikely to overrule a recommendation from the bloc's competition commissioner, Margrethe Vestager. The commission now faces a February 14 deadline for its ultimate decision, and as of late Thursday, there has been no immediate response to requests for comments.
While Amazon still has the option to walk away from the deal, the repercussions of the potential rejection have already had a considerable impact. iRobot's shares experienced a nearly 40% drop in after-hours trading following the WSJ report on the EU's intention. Closing trading at $23.62 on Thursday, well below the agreed $61 per share acquisition price by Amazon, and even below the $49.99 per share price the day before the acquisition announcement.
In November, the European Commission expressed its concerns about the deal, showing the potential impact on competition in the robot vacuum cleaner market. The commission identified the concern that Amazon could potentially hinder iRobot's competitors, thereby restricting their access or prohibiting them from selling their products on Amazon's marketplace.
Despite being cleared by UK competition regulators in June, the deal has been under investigation by the US's Federal Trade Commission, according to undisclosed sources. Amazon continues to face heightened antitrust scrutiny, including a lawsuit by the Federal Trade Commission in September, alleging the maintenance of an illegal monopoly, Market Watch reported.
