Amazon’s investors can chill with M&A freeze

iRobot

30/01/2024 07:35

(The author is a Reuters Breakingviews columnist. The opinions
expressed are her own.)
    By Jennifer Saba
       NEW YORK, Jan 29 (Reuters Breakingviews) - Amazon.com
 AMZN.O  may have been cast into the dealmaking tundra. The
e-commerce giant is scrapping its acquisition of iRobot  IRBT.O 
after European regulators pushed back. On the face of it, that
might be a problem for boss Andy Jassy. Given his company’s
track record, though, a little restraint might not be a bad
thing.
    Amazon and the maker of the Roomba robot vacuum said on
Monday that they had agreed to terminate their $1.4 billion
merger announced in August 2022. The buyer’s statement is clear
about the problem, taking aim at “undue and disproportionate
regulatory hurdles.” That comes after the European Commission
issued a statement of objections warning that the tie-up could,
in its view, harm competition. For now, it’s hard not to
sympathize with Amazon’s claim that this could be
counterproductive: the target, whose stock plummeted to around a
$450 million valuation, announced it would cut 31% of its
workforce, as well as Chief Executive Colin Angle. Adding to the
injury, a chunk of the $94 million that Amazon is paying iRobot
for terminating the deal is going to private equity shop Carlyle
 CG.O , which provided the struggling company with financing.
    For Amazon, this portends rising problems for any further
acquisitions, no matter how tiny. The logic of the European
complaint, that the $1.7 trillion company could give iRobot a
boost over rivals on its online marketplace, would apply to
effectively any consumer good. Similarly, the U.S. Federal Trade
Commission has accused Amazon of bullying sellers of goods on
its platform. Startups looking to larger technology firms for an
exit may have to knock on other doors.
    Yet this could, in a roundabout way, play to Amazon’s favor.
The company isn’t known for striking transformational deals like
Meta Platforms’  META.O  $1 billion acquisition of Instagram or
Alphabet’s  GOOGL.O  $1.7 billion purchase of YouTube, both of
which turbo-charged their respective buyers’ businesses.
Amazon’s largest deal, for upscale grocer Whole Foods, has not
made it meaningfully competitive with Walmart  WMT.N . It paid
dearly for movie studio MGM; it now plans to slash workers at
the studio’s operations. Healthcare outfit One Medical, acquired
in 2023, similarly threatens to be a drain as Amazon cuts prices
to attract customers.
Amazon’s core business, meanwhile, keeps humming along. Shares
are trading at more than 40 times expected earnings, twice as
high as the industry average, according to LSEG. Investors might
well be chill with a dealmaking freeze.
    Follow @jennifersaba on X
         
    CONTEXT NEWS 
Amazon.com and iRobot mutually agreed on Jan. 29 to terminate
their planned merger. The deal faced pushback from European
antitrust authorities and was still awaiting U.S. clearance. The
e-commerce giant announced the $1.4 billion deal to purchase the
maker of robot vacuum Roomba in August 2022.
    Separately, iRobot said it plans to cut 350 jobs and
that Chair and Chief Executive Officer Colin Angle is stepping
down. Glen Weinstein, iRobot's executive vice president and
chief legal officer, has been appointed Interim CEO. Andrew
Miller, lead independent director, has been appointed chair.

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Graphic: Amazon.com's top deals    https://reut.rs/48RMO7E
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Editing by Jonathan Guilford and Aditya Sriwatsav)
 ((For previous columns by the author, Reuters customers can
click on  SABA/ 
jennifer.saba@thomsonreuters.com; Reuters Messaging:
jennifer.saba.thomsonreuters.com@reuters.net))