Summary List Placement
- Peloton shares spiked as much as 11% in premarket trading on Tuesday.
- The maker of internet-connected exercise machines has agreed to acquire Precor, a leading commercial supplier of fitness equipment, for $420 million in cash.
- Peloton intends to use Precor’s US manufacturing facilities to ramp up production and improve its delivery times.
- The company also expects the deal to bolster its innovation and generate more sales of equipment and subscriptions to gyms, hotels, colleges, and other commercial customers.
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Peloton stock surged as much as 11% in premarket trading on Tuesday after the connected-fitness company struck a deal to acquire Precor for $420 million in cash.
Precor makes cardio and weight machines, and ranks among the largest commercial suppliers of fitness equipment in the world. Peloton plans to use the 40-year-old company’s 625,000 square feet of US manufacturing capacity to make more equipment and ship it to domestic customers sooner.
The takeover will also add nearly 100 people to Peloton’s research-and-development team. Moreover, Peloton hopes it will boost sales of its bikes and treadmills — which are equipped with internet-connected screens to allow users to stream live and on-demand classes — to gyms, hotels, colleges, apartment blocks, and companies that buy exercise equipment for shared use.
Peloton stock has more than tripled this year as the pandemic has spurred more people to invest in home gyms and online fitness classes. The company’s revenues spiked 232% year-on-year last quarter to $758 million, swinging the company from a $50 million net loss to $69 million in net income.
However, Peloton’s manufacturing and distribution has been severely restricted this year, resulting in lengthy waiting times for customers. Its Precor purchase is likely intended to help iron out those issues.