Message Font: Serif | Sans-Serif
 
No. of Recommendations: 2
On Nov 1st 2019
SAN FRANCISCO--(BUSINESS WIRE)-- Fitbit, Inc. (NYSE: FIT) today announced that it has entered into a definitive agreement to be acquired by Google LLC for $7.35 per share in cash, valuing the company at a fully diluted equity value of approximately $2.1 billion.

“More than 12 years ago, we set an audacious company vision – to make everyone in the world healthier. Today, I’m incredibly proud of what we’ve achieved towards reaching that goal. We have built a trusted brand that supports more than 28 million active users around the globe who rely on our products to live a healthier, more active life,” said James Park, co-founder and CEO of Fitbit. “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.”

"Fitbit has been a true pioneer in the industry and has created terrific products, experiences and a vibrant community of users," said Rick Osterloh, Senior Vice President, Devices & Services at Google. "We're looking forward to working with the incredible talent at Fitbit, and bringing together the best hardware, software and AI, to build wearables to help even more people around the world."

Fitbit pioneered the wearables category by delivering innovative, affordable and engaging devices and services. Being “on Fitbit” is not just about the device – it is an immersive experience from the wrist to the app, designed to help users understand and change their behavior to improve their health. Because of this unique approach, Fitbit has sold more than 100 million devices and supports an engaged global community of millions of active users, utilizing data to deliver unique personalized guidance and coaching to its users. Fitbit will continue to remain platform-agnostic across both Android and iOS.

Consumer trust is paramount to Fitbit. Strong privacy and security guidelines have been part of Fitbit’s DNA since day one, and this will not change. 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.

The transaction is expected to close in 2020, subject to customary closing conditions, including approval by Fitbit’s stockholders and regulatory approvals.

After almost 20 days, FIT stock has gone from 7.15 to 6.72. If the closing is supposed to be done aprox. June 2020 that gives you a return of almost 9% in less than 9 months.

Lets analyze the risk for this acquisition.
1. Difficult for GOOGLE to raise cash. That is very rare, it has a lot more than the 2.1 B in cash waiting to be used and also it generates aprox 32b in earning every year.
2. Fitbit stockholder do not approve the sale. If the sale does not happens Fit will go back to trade below 5 per stock and the company is not profitable. Everyone is willing to be acquiered by google.
3. Regulatory approvals. This is the big IF. But if you look at the "wearables category" FIT was not a mayor player and APPLE has clearly a bigger share, FIT has less than 27mm users and is less than 10% market share. FIT customers are complaining for the use of their that if FIT is acquired by GOOG. That reinforces the "desire" to put it a little more difficult for this purchase to go thought. But considering all this issues I believe the possibility to not be approved is low.
Maybe I am missing something but this appear to be a good arbitrage opportunity.

I would like to get some thought from others.....
Print the post  

Announcements

What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.