Alphabet Inc’s Google has agreed to buy smartwatch maker Fitbit Inc for $2.1 billion in an all-cash deal, a move that could shore up the internet giant’s hardware business while also potentially increasing antitrust scrutiny.
Google will pay $7.35 a share for the San Francisco-based Fitbit, according to a statement on Friday. This represents a 71 per cent premium to Fitbit’s share price before Reuters reported that Google had made a bid on the company on October 28. The acquisition is Google’s second major purchase this year, after it agreed to pay $2.6 billion for Cloud software provider Looker in June.
The deal is likely to attract regulatory scrutiny. State and federal authorities are investigating Google for potential anti-competitive practices related to how it handles consumer data and operates in the digital-advertising market. Though Google isn’t a leader in smartwatches or fitness trackers, regulators in the US and elsewhere may have questions about what Google intends to do with the data Fitbit users have shared over the years, including intimate health and location information.
The companies have addressed the likely concerns, by pledging to be transparent about the data Google collects. “Strong privacy and security guidelines have been part of Fitbit’s DNA since day one, and this will not change,” according to the statement. “The company never sells personal information, and Fitbit health and wellness data will not be used for Google ads.”
Google has a growing ecosystem of smartphones, laptops, and smart speakers, and provides a free wearable operating system called Wear OS for other companies to use, but is yet to build its own watch. In a blog post, Google hinted that might change.
“Over the years, Google has made progress with partners in this space with Wear OS and Google Fit, but we see an opportunity to invest even more in Wear OS, as well as introduce ‘Made by Google’ wearable devices into the market,” Rick Osterloh, Google’s senior vice-president for devices and services, had stated in the blog post.
Buying Fitbit would give Google a new platform, along with access to the company’s approximate 27 million active users. Fitbit has sold above 100 million devices, and has an engaged global community of millions of active users, according to the statement.
Google could also combine the company with the smartwatch technology it bought from Fossil Group earlier this year to help it design new products.
Fitbit has been struggling to compete with Apple and others in the smartwatch market. Its shares had sunk to a low of $2.85 apiece at the end of August. The stock has recovered since news of Google placing a bid broke, but is still far below the $20 during its 2015 initial public offering.
The transaction is expected to close next year, according to the companies.