Best Buy's Acquisition of Health Tech Startup Jitterbug May Trigger HSR Concerns

On August 15, 2018, Best Buy Co., Inc. (Best Buy) announced that it signed a definitive agreement to acquire GreatCall Inc. (“GreatCall”) for $800 million as part of its growing business selling health and wellness products specifically focused on the aging population. (Investor Relations, Best Buy). GreatCall is the maker of the senior focused Jitterbug cell phones along with other devices designed to allow elderly consumers to connect with caregivers and to facilitate communication with emergency services. (Barba, Wall Street Journal). The acquisition is projected to be neutral to Best Buy’s adjusted earnings in 2019 and 2020 as well as to increase its adjusted earnings by 2021. (Investor Relations, Best Buy). The acquisition is part of Best Buy’s 2020 strategy to use technology to address key human needs among the aging U.S. population. (Barba, Wall Street Journal). GreatCall headquarters will remain in San Diego and David Inns will remain as the company’s CEO. (Press Release, Market Watch).

Chairman and CEO of Best Buy, Hubert Joly, discussed the importance of using technology to improve the quality of life of the aging population and those who care for them. Joly stated that Best Buy is excited about pursuing new opportunities in the health space by using its experience with technology and serving customers in their home. (Investor Relations, Best Buy). With more than 900,000 paying subscribers participating in GreatCall’s services, Innes, CEO of GreatCall hopes to add to the company’s current annual revenue of over $300 million with Best Buy’s customer focus and larger scale. Id. The acquisition of GreatCall is a continuation of Best Buy’s long-term strategy to make new acquisitions, fund the new operations and make investments in their growth in order to return excess cash flow to shareholders through dividends and share repurchases. Id.

The transaction is expected to close at the end of the fiscal 2019 third quarter but is still subject to regulatory approvals and additional closing conditions. For instance, after a company reports a proposed deal and makes a filing under Hart-Scott-Rodino Act, the Federal Trade Commission (FTC) or the Department of Justice (DOJ) can choose to review on a case-by-case basis. (Merger Review, Federal Trade Commission). Either agency can 1) terminate the obligatory waiting period and allow the parties to complete the transaction, 2) let the waiting period expire, allowing the parties to then complete the transaction or 3) extend the review and ask the parties to submit additional information if it appears there are competition issues. Id. In most cases, the parties are allowed to complete the transaction after the first review. Id.

The appointment of Chairman Joseph Simons to the FTC on May 1, 2018 could have an impact on Best Buy’s future acquisition plans, especially in the world of health technology, as the FTC is putting Big Tech under scrutiny due to the concern that big tech companies are limiting competition in the markets. Acquisitions such as Best Buy’s purchase of GreatCall have led to what FTC Commissioner Rebecca Slaughter refers to as “Pac-Man acquisitions” where big companies swallow up little ones. (Alexis, Bloomberg Law). While the acquisition of GreatCall does not rise to value of larger acquisitions such as that of Amazon’s $1 billion acquisition of Pillpack, Inc., Best Buy may be exposed to increased challenges from the FTC if it continues to pursue the acquisition technology companies in the health space.