Home Business news How Peloton’s $ 420 million Precor deal positions the company for post-pandemic...

How Peloton’s $ 420 million Precor deal positions the company for post-pandemic life

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Peloton Interactive has been one of the big winners from the pandemic. Affluent consumers, stuck at home but still eager to work out, have shelled out big for its equipment and educational apps, making the company one of Wall Street’s staple darlings in 2020.

But the stationary bike maker clearly has its eyes set on the next phase of its growth, once the tailwind of the pandemic wears off. Peloton said Monday evening that he was buying Precor, a fitness equipment maker with deep and long-standing relationships with commercial customers such as hotels, gyms, corporate campuses and apartment buildings, for $ 420 million. Precor customers, injured and abandoned for now, will recover once COVID-19 restrictions ease and people start to hang out and more.

Plus, Precor has the manufacturing muscle Peloton needs to meet demand. Peloton lost business because of customers frustrated with long wait times. But Precor has 625,000 square feet of manufacturing space in North Carolina and Washington state, which is expected to help Peloton manufacture its connected fitness equipment in the United States by the end of 2021.

“By bringing fitness equipment closer to US consumers, Peloton will be able to deliver connected fitness products to members more quickly,” the company said. in his press release Tuesday.

Last month, Peloton warned investors that it would struggle with supply limitations “for the foreseeable future”, with longer wait times for its original product and its best-selling product, the Bike +, for two more quarters. His newer bike, featuring a contraption that allows users to move the display screen so they can do workouts off the bike, met huge demand, adding to the pressure on Peloton.

News of the acquisition was greeted warmly by investors, who sent the shares up 12% on Tuesday. For the year, Peloton shares have more than quintupled. (In early November, they were struck by the news of the strong efficacy of the Pfizer / BioNTech vaccine, but they have more than bounced back since.)

After the deal closes in early 2021, Precor will operate as a business unit within Peloton and will continue to manufacture its own branded products, which it already sells in more than 100 countries.

Precor sales will also add about $ 500 million in annual revenue to Peloton (which has grossed more than $ 2 billion in the past 12 months) by some estimates. Overall, the deal could allow Peloton to become a smarter, more efficient manufacturer, able to serve a much larger market and help it move from the heavy-truck-of-the-day pandemic to a business. sustainable.

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