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iRobot (IRBT) to Buy SODC’s Distribution Business in Japan


iRobot Corporation IRBT expanded its commercial growth opportunities in Japan by signing a definitive contract to acquire the distribution business of Sales On Demand Corporation (‘SODC’), a privately-held company in Tokyo.

Since 2004, SODC has been a prominent distribution partner of iRobot in Japan. SODC has aided in making iRobot a leading consumer robotics company in Japan. The country is iRobot's biggest consumer robotics market outside North America.

iRobot would be acquiring SODC’s Japanese distribution business for a cash amount equivalent to the book value of the purchased assets at close, majorly inventory. The amount is anticipated to be in the range of $14–$16 million, subject to fluctuations in exchange rate on the day of transaction. The companies expect to close the deal in Apr 2017.

The SODC distribution business buyout would make iRobot’s business more competent in Japan. This is because iRobot would be able to directly control its variable post- and pre-sales Japanese marketing activities on the back of this strategic move.

The company anticipates this buyout to generate revenues of roughly $20–$25 million and earnings by 25–35 cents per share in 2017; subject to one-time expenses, acquisition costs and purchase price accounting modifications. In addition, the company affirmed that the deal would support its top line, gross margin and profitability in 2018 and beyond.

iRobot’s stock valued $54.09 per share as of Nov 21, 2016.

In the last 30 days, the Zacks Consensus Estimate for the stock has been revised upward for 2017. We perceive that such acquisition activities would boost investors’ confidence towards the Zacks Rank #2 (Buy) company.

Zacks Rank and Other Stocks

Some other favorably placed stocks within the industry include ACCO Brands Corp. ACCO, Applied Industrial Technologies, Inc. AIT and Alarm.Com Holdings, Inc. ALRM.

ACCO Brands Corporation currently sports a Zacks Rank #1 (Strong Buy) and has an average positive earnings surprise of 23.93% for the trailing four quarters. You can see the complete list of today’s Zacks #1 Rank stocks here.

Applied Industrial Technologies, Inc. currently carries a Zacks Rank #2 and has an average positive earnings surprise of 4.93% for the last four quarters.

Alarm.Com Holdings, Inc. currently carries a Zacks Rank #2 and has an average positive earnings surprise of 165.56% for the trailing four quarters.

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