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Peloton’s stock jumped 8% after hours, following news of an announced deal to buy the equipment manufacturer, as a way to expand exports.
Peloton’s stock jumped 8% after hours, following news of an announced deal to buy the equipment manufacturer, as a way to expand exports.
Fitness manufacturer and class streamer, Peloton, has announced its intentions to acquire Precor, one of the world’s largest suppliers of commercial grade fitness equipment. The company’s well known for their hotel and gym brands, which is likely the exact reason why Peloton is determined to purchase the company.
The deal is expected to value Percor at $420 million, marking Peloton’s largest deal to date. It’s likely to allow Peloton to bring on a much higher amount of orders, with expanded manufacturing capabilities, in a time where the company has been struggling to push bikes to consumers within months.
Percor currently holds a significant national manufacturing operation, with dedicated R&D for both equipment and manufacturing processes. Peloton said in a press release that the deal will add over 625,000 square feet of manufacturing facilities through the US, mostly in Precor facilities located in Whitsett, North Carolina (hey that’s my state), and Woodinville, Washington.
While the expected short-term goal for this acquisition is to boost Peloton’s manufacturing capabilities to make up for extraordinary demand for the company’s $2000+ bikes, it’s likely that this deal will help boost Peloton’s long-term business as it allows access to high-growth markets in other locations.
Once Peloton’s own at home market begins to grow at an even faster rate, the additional capital and access to Precor’s manufacturing abilities, would allow the company to push into Precor’s own markets of gyms, hotels, and other more communal areas.
The pandemic’s been a massive help for Peloton’s short term market, as more people were pushed home and forced to workout from their own home offices, which you can read about here, gyms on the other hand have had a really bad year. That includes Precor’s main place of business, whether it be gyms or hotels, as both have had significant visitation losses.
While this happens to be Peloton’s biggest deal to date, there’s a big chance that the company managed to pick up Precor for a relative bargain. It’s rumored that Precor owner, Anta Sports, was planning on a sale of the company for around $500 million last year, but the price was cut due to revenue losses.
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Peloton President, William Lynch said “By combining our talented and committed R&D and Supply Chain teams with the incredibly capable Precor team and their decades of experience, we believe we will be able to lead the global connected fitness market in both innovation and scale,” on the deal, giving the idea that he believes on continuing growth for the soon to be absorbed company.
When Peloton reported earnings in November, the company specifically mentioned that it would be operating under supply constraints for the “foreseeable future.” This Precor deal might be the only reasonable way that Peloton will be able to keep up with demand, or at the very least, allow them to reduce the number of cancels due to long wait times.
The company expected Precor to introduce the newly combined company to new markets, mostly thanks to Precor’s long-term existing relationships with international hotel chains, complexes, college and corporate campuses globally.
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