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Why iRobot Stock Plunged Today

Motley Fool - Wed Jan 10, 6:41PM CST

Shares of iRobot (NASDAQ: IRBT) fell 19.8% late Wednesday after Politico reported Amazon.com(NASDAQ: AMZN) will not offer concessions to European Union (E.U.) antitrust regulators as it works to clear its impending acquisition of the home robotics specialist.

Amazon isn't backing down from antitrust regulators

Citing two people familiar with the situation late this afternoon, Politico says Amazon and iRobot have until the end of the day today to present offers to the European Commission (EC) to make changes to Amazon's business in the E.U. market. Amazon is apparently opting not to cave to that pressure.

Recall in November, the EC issued a "statement of objections" to Amazon's deal to acquire iRobot -- best known for its Roomba line of robotic vacuum cleaners (RVCs) -- detailing its view that the purchase could restrict competition in the market for RVCs.

Did Amazon just call the EC's bluff?

As it stands, the EC has set a deadline of Feb. 14, 2024, to approve or deny the acquisition. By choosing not to offer any proposed changes to its business in Europe, however, Amazon significantly increased the risk that regulators might decide to strike down the deal.

At the same time, however, Reuters previously reported that EC lawyers were initially opposed to sending the statement of objections to Amazon in the first place, arguing the acquisition posed no competitive threat and should be cleared on an unconditional basis. With that in mind, perhaps this is more a case of Amazon calling regulators' bluffs and assuming the deal will get cleared regardless.

If that happens -- and with iRobot stock now trading at a more than 40% discount to the agreed acquisition price -- this could be an interesting bit of merger arbitrage for investors willing to make a speculative bet the deal goes through.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Steve Symington has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon and iRobot. The Motley Fool has a disclosure policy.

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