(Bloomberg) — Peloton Interactive Inc. agreed to buy fitness-equipment company Precor for $420 million to gain U.S. manufacturing capabilities and new expansion opportunities.
The deal is expected to close early next year and is the largest to date for the New York-based maker of pricey bikes and treadmills. Precor, a division of Finnish sporting goods company Amer Sports, is owned by a group of investors including ANTA Sports, FountainVest Partners, Anamered Investments Inc. and Tencent Holdings Limited.
Peloton sales have soared this year as the pandemic shut gyms and forced people to work out from home. However, the company struggled to keep up with demand. That led to long wait times and frustrated customers. By making fitness equipment closer to U.S. consumers, Peloton will be able to deliver products sooner. Existing manufacturing facilities overseas will continue operating, according to the company.
“We have seen a ton of growth. No one would wish a global pandemic on anybody, but it’s been a tailwind for our business,” Peloton President William Lynch said. “Keeping up with that growth, which has been a moving target, has been a big company priority.”
“As we’ve been investing in scaling our manufacturing, this is an area where Precor is very strong,” he added.
Through the deal, Peloton will gain 625,000 square feet (58,000 square meters) of manufacturing capacity in Whitsett, North Carolina, and Woodinville, Washington. That should help the company get its products to U.S. consumers faster, starting in late 2021. Peloton shares rose 2% in extended trading following the news.
Precor provides commercial-grade stationary bikes, ellipticals, treadmills, climbers and strength-training equipment to gyms, hotels, apartments, college campuses and other corporate locations. Thus far, Peloton’s business has focused on sales to consumers, but the company plans to use Precor’s relationships to expand into the commercial market.
The deal will also bring about 100 Precor research-and-development engineers to Peloton. Precor will operate as a business unit of Peloton and Precor President Rob Barker will become chief executive officer of this division. He will also be general manager of the new Peloton Commercial business, reporting to Lynch, the company said.
The $420 million transaction is a strategic departure for Peloton, which has mostly eschewed acquisitions — though Lynch said the company may pursue more deals. Peloton shares have jumped about 400% this year, valuing the company at $42 billion.
