uploads///Google Fitbit

Google Nearly Saved $800 Million on Fitbit Acquisition


Nov. 28 2019, Published 7:36 a.m. ET

Google (GOOGL) announced early this month that it would be acquiring Fitbit (FIT), a prominent maker of fitness trackers and smartwatches. Although the deal has run into some opposition, Fitbit has a lot to offer Google.

Google agreed to acquire Fitbit for $7.35 per share, thereby valuing the company at $2.1 billion. But that’s not what Google would have paid for the deal had everything gone well for it from the start. According to CNBC, citing a regulatory filing, Google originally offered to acquire Fitbit for $4.59 per share. But another party expressed interest in acquiring Fitbit, kicking off a bidding war. Eventually, Google won the bidding war against what is believed to be Facebook (FB). But that was after Google dramatically boosted its bid from its original offer.

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Buying Fitbit at the original bid would have saved Google some decent money

If the $7.35 per share price that Google agreed to pay for the deal valued Fitbit at $2.1 billion, then its original offer of $4.59 per share would have valued the company at around $1.3 billion. Therefore, Google could have saved $800 million in the Fitbit deal had its original bid succeeded.

Google could have done a lot with $800 million savings in the Fitbit acquisition deal. For example, the company could have recouped the more than $250 million it has recently agreed to pay in settlements and fines over issues ranging from data privacy to age discrimination. Moreover, Google would have had instant cash for its $300 million news program. And doing all that would still have left Google with nearly $250 million in change.

Google’s big spending calls for a large war chest

Google is spending big on its cloud computing business, real estate, and product development. In the last three years alone, Google has spent $30 billion to expand its global infrastructure, laying undersea cables and building data centers. The company plans to spend about $3.3 billion in the next three years on data center developments in Europe.

Last year, Google and its sister companies under the Alphabet corporate family spent $21.4 billion on product research and development. The Alphabet units have already spent $18.8 billion this year on product development. Google parent Alphabet finished the third quarter with over $121 billion in cash.


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