Peloton shares soar after company announces $420 million deal for fitness equipment maker Precor
- Peloton plans to acquire the exercise equipment manufacturer Precor for $420 million, in a bid to speed up production and meet promised delivery windows.
- As part of the deal, Peloton will acquire Precor's more than 625,000 square feet of manufacturing space.
- The deal is expected to close in early 2021.
Peloton shares soared Monday after the company announced it plans to acquire the exercise equipment manufacturer Precor for $420 million, in a bid to speed up production of its cycles and treadmills and meet its promised delivery windows.
Its stock jumped more than 8% in after-hours trading.
Demand for Peloton's exercise equipment has surged during the coronavirus pandemic, straining its supply chain, as consumers look to work out at home during the pandemic.
As part of the deal, Peloton will acquire Precor's factories in Whitsett, North Carolina, and Woodinville, Washington, which combined have more than 625,000 square feet of manufacturing space. The deal also boosts Peloton's product development efforts, by adding nearly 100 research-and-development employees to its existing staff.
The deal is expected to close in early 2021. Once it is completed, Precor will operate as a business unit within Peloton, the company said.
Current Precor President Rob Barker will become CEO of Precor and general manager of Peloton Commercial, reporting to Peloton President William Lynch, the company 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," Lynch said in a statement.
When Peloton reported quarterly earnings in November, it warned that it would be operating under supply constraints "for the foreseeable future," due to the heightened demand for its products. As sales have surged, Peloton customers have reported delayed shipments and poor service.
Peloton expects Precor, which is known for its lower-end commercial fitness equipment including ellipticals and rowers, will help introduce the combined company to new markets, thanks to Precor's existing relationships with U.S. hotel chains, multifamily residences and college and corporate campuses. As it joins Peloton, Precor will continue to sell its existing brands.
As of Monday's market close, Peloton shares have surged more than 403% this year, bringing its market cap to $42.2 billion.