Peloton Interactive Inc. (NASDAQ: PTON) is on the cusp of making fitness equipment closer to U.S consumers. The company is spending $420 million to gain U.S manufacturing capabilities with the acquisition of fitness equipment company Precor the acquisition also aligns with the company’s expansion drive in pursuit of opportunities for growth.
Precor acquisition
Precor is to operate as Peloton’s business unit once the transaction is finalized. The company’s President, Rob Baker, is to become the chief executive officer of the division and general manager of the Peloton commercial business.
Precor becomes Peloton's biggest acquisition to date. The $420 million transaction marks a departure from Peloton's strategy, which has previously shied away from acquisitions. Peloton will now be able to make most of the equipment in the U.S to meet the ever-growing demand.
While sales have soared significantly this year, the company has struggled to keep up with demand in the wake of people being forced to work-out from home. With gym facilities remaining closed, more people buy the fitness equipment and set up gyms at home.
Likewise, the company has had to scale up its manufacturing capacity to meet the growing demand in the recent past. Precor will allow Peloton to gain 625,000 square feet of manufacturing capacity in North Carolina and Washington.
Precor Synergies
The deal also allows Peloton to leverage the expertise of about 100 Precor research and development engineers. Likewise, it should make it easy for Peloton to get products to U.S consumers much faster starting in late 2021.
Precor should also supplement the Peloton product line as it is known to provide commercial grade stationary bikes, treadmills, and climbers. It also supplies strength training equipment to gyms, hotel apartments, and college campuses.
Anta has previously considered offloading Precor as it sought to raise capital. The company’s senior investor relations director has already reiterated that funds generated from the disposal will go a long way in improving cash flow. The funds should also help the company invest in big brands and core development areas.