I thought I'd finally written my final column that referenced Fitbit Inc. (FIT) , but not so fast. It looks like there's a postscript (hopefully the last) in the aftermath of the company's agreement to be acquired by Alphabet Inc. (GOOGL) for $7.35 share that was announced Nov. 1.
On Tuesday, a Preliminary Proxy Statement filed with the Securities and Exchange Commission (SEC) revealed how the deal unfolded, and it was enough to create a small buzz in the markets.
According to the filing, there was actually a mini-bidding war for Fitbit. Here's the brief version: On June 11, the CEO of an entity referred to as "Party A" had dinner with Fitbit CEO James Park. Another dinner followed in July, with CEOs present, as well as members of respective management teams. A confidentiality agreement was signed in August with "Party A."
Meanwhile, by July, Fitibit had signed Qatalyst Partners as its financial advisor in pursuing a sale of the company. Late that month, Qatalyst contacted nine "strategic parties" to gauge potential interest in acquiring Fitibt. Three, referred to as "Party B", "Party C" and "Party D," expressed interest. In September, all three dropped out of contention.
Days later on Sept. 24, "Party A" expressed interest in acquiring Fitbit. Then, on Oct. 2, Alphabet offered $4.59 a share in a non-binding letter of interest. On Oct. 10, Fitbit's board of directors rejected Alphabet's bid but stated that it would consider a bid of $6.00 a share. The next day, Alphabet increased the offer to $5.05 a share.
On Oct. 12, the CEO of "Party A" made a verbal offer to Fitbit CEO Park of $5.90 a share. Qatalyst informed Alphabet there was a higher bid, and on the same day Alphabet raised its bid to $6.50 a share. Fitbit then approached Alphabet and "Party A" requesting that each submit their "best and final proposal," which would need to include a reverse $250 million termination fee, to be paid to Fitbit in the event a deal could not close due to antitrust rulings.
Still, the same day, the CEO of "Party A" reached out to Park, asking him to provide a specific price that would allow the two companies to enter negotiations. Park declined to do so, and "Party A" dropped out of contention, or so it appeared.
Later that day, Alphabet revised its bid to $7.05 a share and agreed to the reverse termination fee. That evening, the CEO of "Party A" again contacted Park and offered $7.30 a share, but did not address the reverse termination fee. Alphabet was then informed that another entity had made a higher bid. The next day, Alphabet submitted a written proposal, offering $7.35 a share, and agreed to the reverse termination fee. The rest, as they say, is history. The deal was announced Nov. 1.
The thing that made Tuesday's disclosure of this process so interesting is that Fitbit rose 3% in pre-market trading in reaction, almost as though some thought the bidding war might not be over. In addition, there was unconfirmed speculation Tuesday reported by CNBC that Facebook Inc. (FB) was indeed "Party A." (Alphabet and Facebook are holdings of Jim Cramer's Action Alerts PLUS charitable trust.)
I am just happy to move on from FIT. It ended up being a profitable trade, but with many ups and more downs. It was profitable because a good portion of the position was taken when the stock was near its lows. Little did I know, at the time, how low the initial bids actually were.
