Fitbit Health Data Won't Be Used for Google Ads, Says Fitbit, Announcing $2.1 Billion Google Buy
After months of speculation it was an acquisition target, Fitbit said Friday it agreed to be bought by Google for $7.35 per share in a cash deal valued at $2.1 billion. Under the proposed deal, Fitbit will become a wholly owned subsidiary of Google, said an 8-K filing with the SEC. Numerous sources reported last week Google was interested in the fitness wearable and data company, shooting Fitbit shares up 30 percent Monday to $5.62.
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Google has made progress in the wearables space over the year with Wear OS and Google Fit, blogged Rick Osterloh, senior vice president-devices and services, Friday, but the company sees a bigger opportunity in Wear OS and introducing Made by Google wearables into the market. Working with Fitbit’s team “and bringing together the best AI, software and hardware, we can help spur innovation in wearables and build products to benefit even more people around the world,” he said.
Fitbit CEO James Park said in a statement: “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.” Fitbit pioneered the wearables category and describes its ecosystem as an “immersive experience from the wrist to the app, designed to help users understand and change their behavior to improve their health.” It has sold more than 100 million devices.
Fitbit will continue to remain platform-agnostic across both Android and iOS, and its “strong privacy and security guidelines” won’t change, it said: “The company never sells personal information, and Fitbit health and wellness data will not be used for Google ads.” Fitbit has instituted strong privacy and security guidelines “since day one, and this will not change,” it said. Users will continue to be in control of their data, it said.
Privacy and security “are paramount,” said Osterloh, noting Google device users “are trusting Google with your information.” The company will work hard to protect users’ data, “put you in control and give you transparency about your data,” he said, saying it will be transparent about data it collects and why: “We will give Fitbit users the choice to review, move, or delete their data.”
Park said he was excited about what lies ahead, but it wasn’t clear what his role will be under Google ownership. The deal is expected to close next year subject to Fitbit shareholder and regulatory approvals.
Cowen expects shareholders to approve the deal “given the all-cash offer, premium to pre-press speculation share levels [$4.31 on Oct. 25] and Fitbit’s arguably weakened position given recent losses & evolving industry dynamic (in particular Apple's success).” Tech platforms are under increased antitrust scrutiny, but Fitbit’s relatively small size and hardware-based nature “make the deal less likely to face regulatory opposition,” analyst John Blackledge wrote investors Friday.
Blackledge noted Google’s blog post saying the company plans to work closely with Fitbit to combine the best of their respective smartwatch and fitness tracker platforms, “suggesting that the Fitbit platform may be expanded with Google technology under new ownership and that Fitbit technology may be integrated into existing Wear OS devices.” The acquisition is being handled by the Google subsidiary, not by Alphabet or Other Bets, “reinforcing our view that the core focus is on wearables technology in support of Google's hardware efforts.”
Wedbush Securities analyst Michael Pachter wrote in a Friday investor note that Google “appears intent to expand in MedTech and go head-to-head with Apple, so it buying Fitbit makes more sense than trying to build yet another competitor to Fitbit.”
Fitbit’s collaboration with Google began in April 2018 (see 1804300010), allowing the companies to compete with Apple. The wearables maker “has struggled to expand Health Solutions, but Google provides the resources to expand and compete at the highest level,” said Pachter, with Fitbit providing the devices and data tracking, and Google facilitating data transfer between device and medical professionals -- and providing data storage.
Wedbush expects regulators “to scrutinize Google’s handling of Fitbit’s vast personal data, despite Fitbit’s news release saying Google won't sell personal information, health data won't be used for targeted ads and users will have full control of their data.
Under the purchase agreement, Fitbit will be required to pay an $80 million termination fee in certain circumstances if it accepts a superior proposal, and it will have to pay a $21 million fee if either party terminates the deal because Fitbit shareholders reject the agreement. Google will have to pay a $250 million fee if it can’t obtain antitrust approvals, said the 8-K filing.