Google is expanding its device portfolio into smartwatches, reaching an agreement to acquire Fitbit in a deal worth $2.1 billion.
In announcing the agreement, Fitbit pointedly promised customers that it would strenuously protect their privacy. “Strong privacy and security guidelines have been part of Fitbit’s DNA since day one, and this will not change,” the company said. “Fitbit will continue to put users in control of their data and will remain transparent about the data it collects and why.”
Specifically, according to Fitbit, health and wellness data collected from users’ smartwatches and other devices will not be used to help target Google ads, the company said. In addition, Fitbit pledged to continue to remain “platform agnostic” with support for both Google’s Android and Apple’s iOS.
Fitbit’s stock popped 17% when trading opened Friday, at $7.25 per share. Google is proposing to buy Fitbit in an all-cash deal for $7.35 per share.
A pioneering wearable devices company founded in 2007, Fitbit competes with companies including Apple (which sells the Apple Watch line), Samsung and Garmin. Fitbit’s implied valuation of $2.1 billion with the Google is less than one-fifth its peak market cap of over $10 billion after it went public in June 2015.
The deal for Fitbit fills the wearables gap in Google’s device lineup. “A key long-term secular theme for tech platforms will be the digitalization (via smart mobile devices) of health/fitness/wellness,” UBS Securities analyst Eric Sheridan wrote in a research note Friday. “Prior to this transaction, we saw Google as having relatively low exposure to this theme.”
For Alphabet, Google’s parent company, the $2.1 billion Fitbit deal is a blip on its balance sheet — representing about 1.7% of Alphabet’s cash balance as of Sept. 30, 2019. Facebook also had been in talks to acquire Fitbit but was offering to pay only half of Google’s purchase price, The Information reported, citing anonymous sources.
San Francisco-based Fitbit uses data to deliver personalized guidance and coaching to users. The company says it has sold more than 100 million devices worldwide to date.
“We have built a trusted brand that supports more than 28 million active users around the globe who rely on our products to live a healthier, more active life,” Fitbit co-founder and CEO James Park said in a statement. “Google is an ideal partner to advance our mission. With Google’s resources and global platform, Fitbit will be able to accelerate innovation in the wearables category, scale faster, and make health even more accessible to everyone. I could not be more excited for what lies ahead.”
Google is “looking forward to working with the incredible talent at Fitbit, and bringing together the best hardware, software and [artificial intelligence], to build wearables to help even more people around the world,” said Rick Osterloh, senior VP of devices and services at the internet giant. “Fitbit has been a true pioneer in the industry and has created terrific products, experiences and a vibrant community of users.”
For the first six months of 2019, Fitbit sales grew 7%, to $585.4 million, and reported a net loss of $73.8 million (an improvement from a net loss of $95.2 million in the first half of 2018).
The deal is expected to close in 2020, subject to customary closing conditions, including approval by Fitbit’s stockholders and regulatory approvals.