Amazon.com Inc.'s announcement of a revised acquisition bid for the creator of the Roomba caused a severe setback for iRobot Corp. and sent its stock plummeting.
In order to take into account iRobot's new financing obtained during the protracted merger review process, the e-commerce giant said that it would now pay $51.75 per share, 15% less than its previous bid, according to a report from Bloomberg.
To finance its continuous operations, iRobot obtained a $200 million financing line, which raised its net debt and made a lower purchase price necessary.
Under the conditions, iRobot, the manufacturer of the Roomba robot vacuum, will bear a heavy burden, including penalties for early loan repayment. The firm sought a senior secured term loan, with a floating interest rate of 14%, from the private credit division of Carlyle Group Inc.
iRobot's shares fell 11% in New York after the announcement, but Amazon's was slightly impacted. The drop happened almost a year after Amazon's $1.7 billion acquisition of iRobot as part of its consumer robotics plan.
iRobot CEO Expressed Optimism
Colin Angle, the CEO of iRobot, said the new financing is enough to continue operations in a competitive market, fulfill liquidity demands, and settle current debts, as per a Geek Wire report. He believes that the financing procedure gave the most excellent conditions for further financial assistance.
The United Kingdom approved the Amazon-iRobot agreement last month, but the European Commission launched an investigation early this month that will conclude in November. The US Federal Trade Commission plans to launch its own inquiry on the deal, per TechCrunch.
The purchase now confronts a new challenge: convincing iRobot's shareholders to accept the improved offer. The revised proposal has significantly decreased from the 20% premium that shareholders first approved, now only representing a 2% premium above iRobot's trading price before Amazon's initial approach.
Despite the difficulties, it is doubtful that shareholders would prevent the purchase at this point, given the advanced stage of the agreement. However, the Amazon-iRobot merger must undergo regulators' scrutiny before it becomes finalized.
