Fossil Group Inc, Richardson, Texas, entered into an agreement on Wednesday to acquire wearable product manufacturer Misfit, Burlingame, California, for $260 million.
The acquisition is expected to close before the end of 2015, subject to customary closing conditions and regulatory approval, according to a media release from Fossil.
"We have a significant opportunity to add technology and connectivity across our platform of watches and accessories," Fossil Group CEO Kosta Kartsotis said in a statement. "With the acquisition of Misfit, Fossil Group will be uniquely positioned to lead the convergence of style and technology and to become the fashion gateway to the high-growth wearable technology and connected device markets."
The acquisition will enable Fossil to scale Misfit's technology across the Fossil, Skagen and a targeted portfolio of 16 brands in 2016, which the company said will accelerate its connected accessory roadmap. The acquisition also will expand Fossil's addressable market with new distribution channels, new products, new brands and new enterprise partnerships, including music, fitness, health care and digital entities, according to the release.
"With the acquisition of Misfit, Fossil Group will be positioned to win with the connected consumer," Fossil Chief Strategy and Digital Officer Greg McKelvey said in a statement. "Our world-class design and global distribution, combined with Misfit’s technology platform, creates a significantly advantaged, multiâbrand and global wearable technology business poised to drive the convergence of fashion and technology."
Misfit founder Sonny Vu will serve as president and chief technology officer of connected devices for Fossil Group and will be a member of the company's executive leadership team.
"We are thrilled to join forces with Fossil Group to usher in the next era of wearables where elegance, beauty and long-lasting wearability are paramount," Vu said. "Together, we will introduce products that blend Misfit’s seamless, intuitive technology and user experience with the design, style and branding that is the hallmark of Fossil Group."
Vu founded Misfit in 2011 with John Sculley, the former CEO of Apple and Pepsi, and Sridhar Iyengar, co-founder and former chief technology officer of AgaMatrix. Misfit's products include the Shine, Shine2 and Flash fitness and sleep monitors.
Fossil's products are sold to department stores, specialty retail stores and specialty watch stores in the United States and approximately 150 countries. Fossil reported net sales of $771 million in the third quarter, marking a 14 percent decline from the third quarter of 2014, according to financial results released on Thursday. The company's stock (NASDAQ:FOSL) traded down nearly 33 percent at $34.34 per share at midday Friday.
Fossil will face competition in the wearable technology space from Fitbit, the Apple Watch, Xiaomi, Garmin, Jawbone, Samsung, and others. The International Data Corporation reported Fitbit held the largest market share (24.3 percent) among single brands in the second quarter, with Apple second (19.9 percent) and Xiaomi third (17.1 percent).
Fitness wearable vendors shipped 18.1 million devices in the second quarter compared to 5.6 million in the second quarter of 2014 (an increase of 223.2 percent).
Fitbit, which debuted on the New York Stock Exchange (NYSE:FIT) in August, reported $409.3 million in third quarter revenue last week compared to a projected $359 million, but its stock has dropped 32 percent since its financials were released on Nov. 2 and was trading 10 percent lower Friday at midday at $28.25 per share, its lowest per share price since its initial public offering.
One reason for Fitbit's decline over the last week was its plan to release additional shares, which may have rattled investors, according to TheStreet. Fitbit offered to release more than 21 million shares – 7 million from the company and 14 million from "certain shareholders."
However, on Friday, Fitbit announced it is cutting the offering to 17 million shares – 3 million from the company and 14 million from selling stockholders – at a price of $29 per share.