Amazon's $1.2bn acquisition of Zoox

Who?

Acquirer: Amazon

Amazon is a multinational tech giant focusing on e-commerce, cloud computing, digital streaming, and artificial intelligence. Amazon is considered one of the Big Four technology companies (along with Apple, Facebook and Alphabet) and is the largest online marketplace, AI assistant provider and cloud computing platform

Seller (Target): Zoox

Founded in 2014, Zoox is transforming Mobility-as-a-Service (MaaS) through the development of fully autonomous, purpose-built vehicles or "robo-taxis”. Unlike other competitors in the space, Zoox’s strategy does not rely on integrating autonomous driving capabilities with existing vehicles but instead focuses on developing a purpose-built vehicle without a steering wheel, that can move in any direction. While Zoox is behind Cruise and Waymo with regards to the number of testing miles on the road, its rate of improvement has been “notable”, said Citi’s research analysts.

The Deal

Value: estimated $1.2bn – $1.3bn

Announced: 26 June 2020

Financial Advisors to Amazon: not available

Financial Advisors to Zoox: Qatalyst Partners

Why?

Strategic Rationale:

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One (somewhat far-fetched) idea on the rationale is that Amazon could develop its own autonomous ride-hailing fleet that would pivot against Alphabet’s Waymo, GM’s Cruise and even Uber at a time when some of these ride-sharing companies are scaling back on autonomous vehicles amid the pandemic. Just last year Amazon also invested in another self-driving startup Aurora and the electric pickup maker Rivian, pledging to acquire 100,000 delivery vans designed in partnership with Amazon. Perhaps making that idea evermore convincing.

Interestingly:

– Zoox’s estimated purchase price is a hefty discount to the 3.2 billion USD valuation it received in a Series B funding round just 2 years prior (2018). This is a result of: problems with top executives (co-founder Tim Kentley-Klay was suddenly fired in 2018), a legal battle with Tesla over alleged stealing of proprietary information and trade secrets, and finally, general delays in bringing fully autonomous driving tech to market, partly due to the impact of Covid-19. Following this, Zoox cut 10% of its workforce (about 100 jobs) in April, just a week after letting go 120 contract workers.

– According to Reuters, the deal came just in time as Zoox was about to run out of cash by the end of the month. Zoox was using more than $30m a month, which Amazon reportedly had the option to lend to Zoox once the deal had been signed.

– $1.05bn was reportedly offered by Cruise, a self-driving company that had been backed by GM, Honda and SoftBank.