Google has decided to purchase the fitness device marker Fitbit in a deal worth $2.1 billion.
According to analysts, this deal will allow Google to venture into the health trackers and smart watches market. This deal can also be helpful for Fitbit because it is taking place at a time when the company is seeking to get into other business areas.
“Google is an ideal partner to advance our mission,” said James Park, co-founder and chief executive of Fitbit.
According to the deal, the value for a share of Fitbit is $7.35 which is a 19 per cent premium to the closing price of the sticks last weekend.
“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,” said Park, who founded Fitbit 12 years ago.
At a time when Fitbit issued shares to the public in 2015, the market value of the company was at $4 billion and was among the very first makers and sellers of tech-enabled fitness trackers. More than 100 million of its devices have been sold in the market till date. In recent years however the company has been facing stiff competition from new arrivals into the segment and as such was having trouble with its earnings with diminished demand for its products. Last month, the company put itself up for sale.
Ever since reports of a possible takeover of the company by Google started to emerge, Fitbit’s shares have gone up by a staggering 40 per cent within a few days.
It is expected that the deal would be completed in 2020 after completion of regulatory approvals and formalities.
However there can be some hurdles to the deal because of late, growing concerns about monopoly power among regulators in the United States and elsewhere have led to greater scrutiny of acquisitions by the tech giants.
Google adverts would not us its “health and wellness” data, Fitbit said and has promised to uphold privacy protections strictly.
However one of the key attractions in the deal for Google was the health data, said analysts.
“The deep health and fitness data, coupled with the 28 million active users on the Fitbit platform, offer a tremendous value,” Craig Hallum analysts wrote in a note cited by Reuters.
This deal also can be very helpful for Google. Considering the current market value of Fitbit of about $1.4 billion, the $2.1 billion valuation for the company by Google might seem high. But when the huge amount of health data that Google would potentially be able to access from the deal is taken into consideration, the deal looks impressive for Google.
On the other hand, the deal is a noble exit for Fitbit following an appreciable fight to the likes of Apple’s smartwatch in recent years. A Fitbit-Google product could mean Wear OS – Google’s wearable operating system – will get a much-needed boost.
(Adapted from BBC.com)