Takeover allows web giant to take on Apple in fast-growing smartwatch and wearables business

Google has snapped up the Fitbit activity tracker business in a $2.1bn (£1.6bn) deal that will enable the search giant to go toe-to-toe with Apple in the fast-growing smartwatch and wearables business.

Google is paying cash for the San Francisco-based Fitbit, which was set up in 2007.

It is paying $7.35 per share – a premium of more than 70% to the Fitbit share price before the shares were suspended earlier this week amid takeover speculation.

The price, however, is a fraction of the company’s value when it floated in 2015. The shares were initially priced at $20, and soared to more than $50 in the weeks following the initial public offer. But it has suffered in recent years from competition from bigger rivals Apple, Samsung and China’s Xiaomi. In August the group’s shares hit a low of $2.85.

The deal, which is Google’s biggest consumer purchase since it bought home-tech business Nest five years ago for $3bn, will have to be approved by shareholders and regulators, especially over how it handles Fitbit users’ data. The firm claims to have 28m active users worldwide and its fitness trackers store location and physical health data for users who monitor their activity, sleep and and exercise using a range of wearable devices.

Fitbit said it would not sell customers’ personal data and pledged that wellness data would not be used by Google ads.

Google has offered its own fitness tracking service, called Google Fit, since 2014, but has relied on third parties such as Fossil and Tag Heuer to produce Android-compatible smartwatches.

In a blogpost announcing the deal Rick Osterloh, Google’s senior vice president in charge of devices & services, said Fitbit had been a pioneer but that Google could “help spur innovation in wearables and build products to benefit even more people around the world.”

The market for wearables is growing rapidly. Last week, in its latest quarterly financial results, Apple reported annual sales growth of more than 50% in its “wearables” division, which includes watches. The iPhone-maker’s total sales from wearables over the three month period were £6.5bn.

The deal will expand Google’s range of consumer products, which already includes smartphones, headphones, smart speakers and laptops.

Osterloh wrote that Google would not misuse Fitbit users’ personal data: “We will never sell personal information to anyone. Fitbit health and wellness data will not be used for Google ads. And we will give Fitbit users the choice to review, move, or delete their data.”

Earlier this week, amid reports that the deal was being finalised, the British Labour party wrote to the UK’s competition regulator calling for the takeover to be blocked. Tom Watson, the shadow digital, culture, media and sport secretary, called the deal a “data grab”.

He said: “If this acquisition were to proceed, Google could have information on how we sleep, when we move, what we eat, on our breathing and our heartbeats. This data could hardly be more sensitive, but … all this information could then be used [for] micro-targeting, advertising, and behaviour modification. The risk to consumers here is significant.”

Watson has also written to the information commissioner, Elizabeth Denham, expressing concern over the data aspects of the merger and asking her office to assess whether it raises privacy concerns.

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Fitbit insisted its users’ data would be safe in the hands of its new owner. In a statement it said: “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 deal is expected to be completed in 2020, but still needs approval from shareholders and regulators.

Fitbit co-founder and CEO, James Park, 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.”