iRobot takes $200mn loan from Carlyle as Amazon deal price is cut

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iRobot has turned to the private credit industry for a $200mn lifeline in an attempt to shore up its finances as the Roomba vacuum maker’s sale to Amazon faces tough antitrust scrutiny.

iRobot on Tuesday also agreed to reduce the value of its sale to Amazon by 15 per cent, from $61 to $51.75 a share, in a move that reflects the higher level of debt it is taking on ahead of the deal.

The company “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 chief executive Colin Angle said.

The $200mn loan was extended by Carlyle. As banks have pulled back from riskier lending in the wake of the 2008 financial crisis, large private credit managers including Carlyle, Apollo, Blackstone, KKR and Sixth Street have stepped in to fill the void.

Carlyle’s loan carried a steep interest rate, about 14.6 per cent, which could rise if the Federal Reserve continues tightening monetary policy. In May iRobot disclosed its cash balance had plunged nearly 60 per cent from the end of last year, adding it had drawn about a quarter of a $100mn revolving loan from Bank of America.

The new terms reduce Amazon’s offer by $225mn, valuing iRobot at roughly $1.45bn. The Roomba maker has struggled this year as a boom in sales during the pandemic has ended and one of its largest customers cut back orders. It burnt through $95mn of cash in the first quarter, almost as much as all of last year, forcing it to draw down debt and cut costs.

Regulators in Europe and the US have mounted in-depth investigations into Amazon’s takeover, which would extend the range of “smart” home gadgets the ecommerce company sells. The deal has raised unusual concerns about whether data collected by iRobot’s Roomba vacuum cleaners could leave Amazon with a far more detailed picture of its customers’ homes, giving it an unfair edge.

In a move to protect itself if the deal is blocked by regulators, Carlyle has required iRobot to pay off up to $75mn of the $200mn loan by using the vast majority of the $94mn termination fee Amazon has agreed to pay.

If antitrust reviews prevent the merger from being finalised before August 2024, the deadline agreed by iRobot and Amazon, the vacuum maker may not be entitled to any of the $94mn, which would weigh heavily on its finances.