iRobot Maker Forced To Raise Cash As Amazon Takeover Delayed Loss Over $1.3 Billion
As archrival Ecovacs was rolling out another premium robot vacuum cleaner in Australia into what is seen as a growth market, archrival iRobot was raising cash and hoping like hell that Amazon is able to take over the struggling US robotic cleaning Company.
The loss-making iRobot has been struggling for some time and in Australia Melbourne based distributor IXL home does little to promote the brand, compared to Ecovacs, who at a packed event yesterday in Sydney, rolled out their latest Debot T20 Omni Ecovacs robot cleaning machine.
iRobot is bleeding cash, and their hope is that Amazon who yesterday slashed their offer price for the business is able to get the deal through regulators.
When Amazon announced it would buy iRobot last year for US$1.65 billion, antitrust experts said it was likely to face tough scrutiny.
Within days regulators in the US and the EU expressed concern about the takeover, claiming that it could thwart competitors by giving the e-commerce giant access to a new stash of user data.
They set a deadline of Nov. 15 to vet the potential impact.
Now they are facing in-depth investigations by the US Federal Trade Commission and European Union regulators.
As a result of the probe and falling sales the business has been forced to raise cash to stay afloat.
This has resulted in the Carlyle Group taking a big gamble by stumping up a US$200 million loan to the maker of Roomba vacuum cleaners.
Carlyle, which lent the money through its private-credit arm, is charging iRobot nine percentage points over the Secured Overnight Financing Rate, according to a filing.
That’s well above the six to seven percentage point spread frequently seen on private credit loans, pushing the annual interest rate to a little over 14%, based on current levels.
As Carlyle Group was loaning the money, Amazon was moving to change its acquisition price for iRobot, lowering the price for the Roomba maker to $51.75 per share, down from $61 per share.
The move is supposed to offset the debt incurred from iRobot’s $200 million financing facility.
The delay in getting the deal done, has left iRobot in limbo as it burns through cash claims Bloomberg.
The company posted a net loss of A$1.26 billion in 2022, according to Securities and Exchange Commission filings.
Cash reserves have also fallen from US$47.9 million, compared with $117.9 million at the end of 2022, according to its latest earnings report.
“iRobot is taking on new financing that we believe is sufficient to support our operations in a hyper competitive environment and meet our liquidity needs as well as pay off iRobot’s existing debt,” iRobot Chairman and Chief Executive Officer Colin Angle said in a statement last night.
Bloomberg reported that if the deal doesn’t work out and Amazon pays a termination fee, then iRobot has to use it to pay down the debt. The loan documents also include a stipulation that iRobot must maintain at least $250 million worth of cash, accounts receivables, and inventory on hand at the end of each month, enough to cover the loan.
iRobot shares dropped nearly 14% to about $40.46 on the news.