iRobot Divests From Defense Business for $45M

After being pressured by activist investors, iRobot Corp. is selling its defense unit to Arlington Capital Partners LLC for $45 million.

iRobot is the best-known consumer robotics vendor in the U.S., thanks to sales of 14 million of its Roomba robotic vacuum cleaners worldwide, holding 85 percent of the North American market and generating 90 percent of the company’s revenue. iRobot said that demand for the Roomba 980 and other models was strong in North America and China during the fourth quarter of 2015.

In addition to appliances for floor and gutter cleaning, iRobot makes robots for telepresence, telemedicine, and defense and security.

Los Angeles-based Red Mountain Capital Partners LLC, which owns just 6.1 percent of iRobot’s stock, had been pressuring the company for some time to divest from its military business.

“In the spring of 2014, we engaged Blackstone Advisory Partners LP, now known as PJT Partners, to review strategic alternatives for our defense and security business,” said Colin Angle, iRobot chairman and CEO. “After a thorough and deliberate process, we’ve concluded the sale of the business to Arlington Capital Partners will maximize shareholder value by allowing us to focus on our much larger home segment.”

During an investor call, Angle noted that between the expected proceeds from the transaction and expanding its share-repurchase program, iRobot will have a total of $100 million to acquire 10 percent of outstanding shares, as well as to make new acquisitions.

Angle also said that iRobot has shifted its investment in remote presence robotics to focus on strategic partnerships that could benefit its home business. The company experienced slower sales for its military robots last year and is no longer making significant investment in the engineering for telepresence.

“The divestiture of the defense and security business will allow us to focus on the home robots business, bring new products to market, continue our expansion in China, and build upon successful new marketing campaigns,” Angle said.

One in 10 households in the U.S. will have a consumer robot by the end of this decade, more than double the current figure, predicts Juniper Research.

Military robotics march on

Arlington Capital Partners is a private equity firm specializing in aerospace and defense, government and healthcare services and technology, and business services and software in Chevy Chase, Md. The new unit will be the largest provider of ground robots to the U.S. Department of Defense.

“Arlington Capital is pleased to be partnering with the highly talented iRobot defense and security team on this divestiture to create a new and focused robotics platform,” said Chris Stallmann, a vice president at Arlington Capital. “From weight classes of under 5 to over 300 pounds, we look forward to building upon one of the industry’s broadest and deepest robotics product-line offerings.”

Sean Bielat, a major in the U.S. Marine Corps Reserves and a former Republican candidate for Congress, will lead the new company. He was previously the director of the $100 million PackBot program at iRobot.

Different models of the PackBot ground robots are used for forward observation, hazardous materials handling, and explosive ordnance disposal.

iRobot also made the FirstLook, a portable device that could be thrown to scout out dangerous locations. The market for military robotics will grow from $13.55 billion in 2015 to $21.11 billion in 2020, predicts Markets and Markets.

The transaction is expected to close in the next few months. As part of the corporate divorce, the as-yet-to-be-named company will move out of iRobot‘s current offices in Bedford, Mass.