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Saturday, January 23, 2021

Alphabet really wants to acquire Fitbit

  • Google agreed to acquire Fitbit for more than $2 billion in 2019.
  • The deal has yet to receive the necessary blessings from global regulators.
  • Google pledged two new promises to help ease regulatory concerns.

Google and its parent company Alphabet Inc (NASDAQ: GOOG) offered new concessions to European regulators so it can close its pending acquisition of health-tracker and smartwatch maker Fitbit Inc (NYSE: FIT), The Wall Street Journal reported.

Stuck in limbo

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Google agreed to acquire Fitbit for $2.1 billion ($7.35 a share) back on Nov. 1, 2019, and the company promised at the time not to use Fitbit data as part of any advertising campaign. European Union officials felt the pledge wasn’t enough to ease anti-competitive concerns.

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Thi wouldn’t be the first time Google is in the crosshairs of European regulators in recent memory.

Along with EU officials, the U.S. Justice Department and Australia’s competition authority have yet to offer their blessings towards an acquisition.

Tech giants tend to leverage their massive size and scale to acquire a smaller competitor just to remove them from the competitive landscape, according to WSJ.

Google extends bigger olive branch

Google provided regulators with two new pledges to help ease their concerns. First, Google won’t discriminate against rivals that use the Android operating system. Second, Fitbit’s agreements with other parties it signed before the acquisition, such as Strava, will continue unimpeded if under Google’s umbrella.

Google told WSJ in a statement the deal is “about devices, not data” and it will continue working with the EU to preserve competition.

“We’re also formalizing our longstanding commitment to supporting other wearable manufacturers on Android and to continue to allow Fitbit users to connect to third-party services,” Google told the publication.

The EU has until Dec. 23 to approve or reject Google’s acquisition of Fitbit, although a decision is likely to come earlier.

What Google saw in Fitbit

Google’s rationale for acquiring Fitbit in 2019 appears to be consistent with the company’s latest pledges. Most notably, Google said in its joint press release with Fitbit that it wants to bring together “the best hardware, software, and AI to build wearables to help even more people around the world.”

Fitbit, Google further explained, is not just a device — rather it is an “immersive experience from the wrist to the app.” The watchmaker has sold more than 100 million devices and boasts millions of active users.

Google also reaffirmed at the time its commitment to privacy and security:

“Fitbit will continue to put users in control of their data and will remain transparent about the data it collects and why. The company never sells personal information, and Fitbit health and wellness data will not be used for Google ads.”

Shares of Fitbit continue to trade at a discount to the acquisition price tag of $7.35. This implies that investors may not have full confidence in the likelihood of a transaction successfully closing.

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