M&A

Peloton Bulks Up by Buying Precor for $420M

The deal will enable Peloton to add production capacity for its at-home fitness equipment amid increased demand fueled by the coronavirus pandemic.
Matthew HellerDecember 22, 2020
Peloton Bulks Up by Buying Precor for $420M

Peloton is buying exercise equipment maker Precor for $420 million to bulk up supplies of its at-home fitness products amid increased demand fueled by the coronavirus pandemic.

The acquisition comes about six weeks after Peloton reported sales growth of 232% for the first quarter but warned it would be operating under supply constraints “for the foreseeable future” due to the heightened demand.

A new factory in Taiwan was due to come online this month. Precor’s factories in Whitsett, N.C., and Woodinville, Wash., will give Peloton another 625,000 feet of manufacturing space.

On news of the deal, Peloton’s shares jumped 8.3% to $156.31 in after-hours trading Monday.

“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,” Peloton President William Lynch said in a news release.

As Engadget reports, “Like a slew of other connected fitness companies, Peloton saw its business surge this year as stay-at-home orders forced exercise buffs out of gyms and into their homes.”

But the increased demand has strained Peloton’s supply chain, with consumers reporting
delayed shipments and poor service. “The fact that future Peloton gear will be produced at least in part in the United States should eventually mean an end to the delays that have plagued many recent orders,” Engadget said.

According to TechCrunch, the deal should also help the company to “accelerate the infiltration of its connected equipment in commercial gyms globally once people feel more comfortable about returning to them safely post-pandemic.”

Competition in the at-home fitness market has also been heating up, with Echelon Fitness, which sells bikes cheaper than Peloton’s nearly $2,000 model, reporting a sales increase of 700% year over year in September. Earlier this month, Apple launched a Fitness+ service for $9.99 that allows iPhone, iPad, and Apple TV users to access exercise classes.

Precor, which was founded in 1980, is known for its lower-end commercial fitness equipment including ellipticals and rowers.