Amazon expands connected device basket with $1.7 billion deal for Roomba-maker

By Akash Sriram

(Reuters) - Amazon.com Inc (NASDAQ:AMZN) will acquire the maker of robot vacuum cleaner iRobot (NASDAQ:IRBT) Corp in an all-cash deal for about $1.7 billion, in the latest push by the world's largest online retailer to expand its cart of smart home devices.

Amazon will pay $61 per share, valuing the Roomba-maker at a premium of 22% from the stock's last closing price of $49.99.

Its shares rose about 19% in early trading. At its peak during the pandemic lockdowns, iRobot traded at $197.4 as hygiene-conscious consumers invested in premium robot vacuum cleaners.

Besides sweeping up dirt, Roomba vacuums that cost as much as $1,000 collect spatial data on households that could prove valuable to companies developing so-called smart home technology.

But its fortunes took a hit as consumers started rethinking how they spend their money amid rising inflation. Its second-quarter revenue fell 30% on weak demand from retailers in North America and Europe, Middle East and Africa.

The deal comes at a time when analysts expect cash-rich technology companies to get on an M&A spree to take advantage of low valuations due to growth pressures. Amazon currently has cash and cash-equivalents of more than $37 billion.

"We haven't heard much lately about Amazon's smart home devices strategy and this acquisition puts it back on the agenda," said Atlantic Equities analyst James Cordwell.

Devices make up for a fraction of the overall sales of Amazon, which sells smart thermostats, security devices, wall mounted smart display and had recently launched a canine-like robot called Astro.

"It seems like (CEO) Andy Jassy is going to employ M&A more than Jeff Bezos and it makes more sense to me now that Amazon is bigger and has more cash," said D.A. Davidson analyst Thomas Forte.

In case the deal is terminated, Amazon would be required to pay iRobot $94 million in termination fee. On completion of the deal, Colin Angle will remain as the chief executive of iRobot.