Private equity firm Arlington Capital Partners is purchasing the defense and security business of iRobot Corp. (Nasdaq: IRBT) to operate it as a yet-to-be-named independent company providing robots for the U.S. military and other clients.
Washington, D.C.-based Arlington Capital will pay up to $45 million to the Bedford, Massachusetts, company for the business, depending on whether certain milestones are met, and the deal is expected to close in the next few months. The new company will be the largest independent provider of ground-based robots to the U.S. Department of Defense, and will also sell robots in the security, industrial and non-U.S. defense markets. Arlington is a middle-market focused PE firm with $1.5 billion of committed capital that focuses on government related growth industries including aerospace and defense, government services and technology, health care, business services and software.
Sean Bielat will be the CEO of the new company and Tom Frost, currently general manager of the defense and security business, will be president. Peter Manos, Arlington managing partner, says the private equity firm plans to expand the company through both organic investment and acquisitions.
One of iRobot's investors, Red Mountain Capital Management, a Los Angeles hedge fund manager, advocated for selling the defense and security robots business so it can instead focus on its home robots business, as spelled out in a U.S. Securities and Exchange Commission Schedule 13D filing in April. In a press release on the deal, iRobot says selling the defense and security business maximizes shareholder value by allowing the company to concentrate on a much larger home segment.
The robots sector is expected to be a bright spot for middle market M&A in 2016 as more companies see advantages in using robots to replace human workers. Acquirers in announced robot M&A deals in 2015 included Sealed Air Corp. (NYSE: SEE) and Omron Corp. in Japan.