Manufacturer Peloton Interactive has agreed to purchase commercial fitness equipment Precor in bulk … [+]
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With growing demand from wealthy home-staying customers, the interactive fitness bike manufacturer Peloton Precor, a leading supplier of work equipment to gyms and hotels, has agreed to buy, for $ 420 million, the biggest purchase to date.
As rising demand has led to delivery delays and consumer complaints, Peloton said Precor’s “large U.S. manufacturing presence,” with 625,000 square feet of U.S. manufacturing capacity in North Carolina and Washington, will help it to deliver results faster and “control the entire production process,” “From design to shipping. Peloton’s current manufacturing network includes third-party manufacturers in the U.S. and Tonic plants owned by a company in Taiwan through the acquisition of Peloton in 2019 from a manufacturer fitness equipment.
“It’s no secret that a steady rise in demand for Peloton products has left the company scrambling to meet demand, especially as they worry about COVID which has been severely delayed. goods from Asia, ”Wedbush analyst James Hardiman said in a report on Tuesday. “We would assume that Precor’s capacity is far from fully utilized due to the lack of equipment orders from commercial customers. ”
Extending the domestic footprint is not the only reason. Precor, which said on its website the first elliptical in the world in 1995, will also give Peloton what Precor President Rob Barker described as “the largest commercial network in the fitness industry. Precor offers Peloton “experience” to its commercial customers that also includes multiple families and physical and college environments.
When the deal closes, which is expected in early 2021, Peloton’s connected fitness products will also be available to Precor’s commercial customers in Peloton’s existing markets, the companies said.
The “build represents an untapped campaign opportunity,” Cowen analyst John Blackledge said in a report on Tuesday.
Precor may also help expand Peloton’s international footprint. Precor, based in the Greater Seattle area, sells to more than 100 countries and has offices in the Americas, Europe and the Middle East and Asia. In comparison, Peloton had 95 showrooms based in New York across the US, Canada, the UK and Germany since June 30. Peloton said it will also add nearly 100 research and development employees at Precor to its R&D team.
Peloton shares rose 12% to $ 161 on Tuesday, more than five times the company’s original eight-year public offering price of $ 29 in September 2019.
“Peloton has a huge runway ahead of consumers & enterprise,” Blackledge said, adding that Peloton has only about 7% of what it described as an “affordable navigation market. ”
With coronavirus keeping people at home, Peloton, whose paper bikes start at around $ 1,900, has benefited from the growing homework move. The company’s latest sales results in the first fiscal quarter ended Sept. 30 more than tripled to $ 757.9 million. Its affiliate fitness subscriptions, which give many home users unlimited access to their live and on-demand classes, have more than doubled to 1.3 million. He finished the quarter with 3.6 million members.
The company’s growth and expanded products in sectors including clothing and footwear may also be offset by the likes of Nike
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