Google to Acquire Fitbit for $2.1 Billion

Fitbit (FIT) shares have gained 15% today. Google (GOOG) (GOOGL) announced that it will acquire Fitbit for $2.1 billion, according to a press release.

The acquisition will be an all-cash deal. Currently, Fitbit stock is trading at $7.12 per share. The stock is valued at $1.843 billion, according to the market cap—still 12% lower than the acquisition price. Notably, Fitbit doesn’t have any debt on its balance sheet.

Google will pay $7.35 per share to acquire Fitbit. James Park, Fitbit’s CEO, thinks that the acquisition is strategic. He said, “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 to take on Apple Watch and Xiaomi

Google will look to take on Apple (AAPL), Samsung, and Xiaomi in the wearables space. Fitbit has lost significant market share in wearables over the years to Apple Watch and Xiaomi.

In the June quarter, Fitbit managed to grow shipments 32% year-over-year to 3.5 million units—up from 2.6 million in the same quarter the previous year, according to the IDC. The growth was higher than the industry growth of 28.8%.

Xiaomi was the top player at the end of the June quarter. The company’s shipments rose 42.2% to 5.9 million units. Xiaomi ended the second quarter with a share of 17.3%. Apple lost its pole position. The company’s shipments rose just 7% to 5.1 million units. Apple ended the second quarter with a share of 14.8%—down from 17.8% in the same quarter the previous year.

The IDC said, “Fitbit, the market pioneer, ranked fourth in the recent quarter. Though its smartwatch business declined, thanks to poor reception of the Versa Lite, the company did manage overall growth due to the popularity of the newly launched Inspire wristbands. Industry buzz surrounding the Versa 2 has been positive and the company’s recent win in Singapore should help the company maintain positive momentum in the months to come.”

Access to loads of data

Although Fitbit has sold over 100 million devices to date, it hasn’t translated to higher sales. In the second quarter, the company’s sales rose 5% despite 31% growth in shipments. The lower increase was due to the lower average selling price.

However, with Google’s acquisition, Fitbit will be able to invest heavily in research and product development. Google will be able to compete in the wearables market. The company will also get access to huge amounts of user data. Fitbit has a user base of 28 million—something Google will look to leverage.

Another market that Google will be targeting is the digital health segment. The global digital health market is estimated to reach $509 billion, according to Grand View Research.

In September, Fitbit announced a partnership with FibriCheck to monitor heart rhythms for irregularities. Fitbit has collaborated with Singapore’s Health Promotion Board on a “healthy population project.”

In August, the company also announced “Fitbit Premium,” which is a new health and fitness subscription service. The paid service allows Fitbit to access user’s data and provide a personalized experience. Two weeks ago, the company announced a healthcare partnership with the Bristol-Myers Squibb–Pfizer Alliance. The collaboration intends to focus on early detection for individuals with higher stroke risk.

Fitbit’s Health solutions vertical still accounts for less than 10% of its sales. The vertical, which grew more than 40% in the first six months of 2019, will likely reach $100 million this year.