EU probe puts Google’s Fitbit acquisition in question

Google’s proposed acquisition of Fitbit valued at $2.1 billion is still far from a done deal after EU regulators decided to take a closer look at the deal. Eight months following the announcement of the tie-up agreement, the two companies don’t appear to be much closer to merging than they were in November. Australia’s competition watchdog, the ACCC, expressed concerns about the pending transaction in mid-June, and the European Commission may soon follow suit, FT reports, citing insiders close to Brussels.

Nearly two dozen other consumer advocacy organizations already warned against Google’s proposed acquisition earlier this week, claiming the move would lead to a data monopoly.

8 months later, Google’s $2.1 billion offer still overvaluing Fitbit

In effect, Google’s all-cash offer amounting to $7.35 per share is still overvaluing Fitbit by some 17%, with the latter’s stock going for $6.29 in after-hours trading on Thursday – just ahead of the long Fourth of July weekend. The below-buyout price is a clear indicator of investor skepticism surrounding the deal.

Google and Fitbit’s pro-merger argument boils down to the tie-up being about devices, not data. Alphabet’s flagship subsidiary has been trying to establish a consumer electronics business for years now, having already delivered multiple generations of smartphones and home automation devices such as smart speakers and displays. The Pixel Buds family also saw it move into wearables in 2017, though it has yet to deliver a wrist-worn gadget in the vein of a fitness tracker or full-fledged smartwatch. That’s precisely what acquiring Fitbit would allow it to do, the originally submitted merger proposal reads.

Fitbit, for its part, sees the buyout as the best exit play it can possibly make. Even before The Great Lockdown, the 13-year-old company was on a downward spiral, largely due to the Apple Watch series eating into its market share. It lost $234 million on $1.42 billion in revenue over the course of 2019, which plummeted its stock down to $5 territory – i.e. utter trash compared to the $32.50 IPO price from 2015.