iRobot takes out $200M loan from Carlyle as Amazon deal cuts price

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

iRobot also agreed on Tuesday to reduce the price of its sale to Amazon by 15 percent, from $61 to $51.75 per share, reflecting the high level of debt it was taking on prior to the deal.

iRobot chief executive Colin Angle said the company is “working on new financing, which we believe is sufficient to support our operations in a highly competitive environment and meet our liquidity needs as well as pay down iRobot’s existing debt.”

The $200 million loan was provided by Carlyle. As banks pulled back from risky 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 had a steep interest rate of about 14.6 percent, which could rise if the Federal Reserve continued to tighten monetary policy. iRobot disclosed in May that its cash balance had shrunk by about 60 percent since the end of last year, plus about one-quarter of the $100 million it had borrowed from Bank of America.

The new terms reduce Amazon’s offer by $225mn, valuing iRobot at around $1.45bn. The Roomba maker has struggled this year as a sales boom during the pandemic ended and one of its biggest customers slashed orders. It spent $95 million in cash in the first quarter, roughly the same as last year, forcing it to reduce debt and cut costs.

Regulators in Europe and the US have launched an intense scrutiny of Amazon’s acquisition, which would expand the range of “smart” home gadgets sold by the ecommerce company. The deal has raised unusual concerns about whether data collected by iRobot’s Roomba vacuum cleaners could give Amazon a far more detailed picture of its customers’ homes, giving it an unfair advantage.

To protect itself if the deal is blocked by regulators, Carlyle has required iRobot to use the vast majority of the $94mn termination fee to pay up to $75mn of the $200mn loan that Amazon has agreed to pay.

If the antitrust review prevents the finalization of the merger before August 2024, the deadline agreed by iRobot and Amazon, the vacuum maker may not be entitled to any of the $94mn that would hit its finances.