Peloton buys Precor
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Peloton buys Precor

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In a surprise move, Peloton – which finished its last financial quarter with US$2bn cash in the bank – has announced it's purchasing commercial fitness giant, Precor. The deal, worth US$420m, is expected to complete in 2021.

Precor will become a division of Peloton, with current Precor president, Rob Barker, becoming CEO of Precor and general manager of Peloton Commercial. He will report directly to William Lynch, president of Peloton.

The market liked the deal, with Peloton's share prices jumping 8 per cent at the news. Peloton's shares have climbed 403 per cent this year, due to record sales during the pandemic, taking it to a market capitalisation around US$42bn.

This increased demand for Peloton products, however, has led to challenges with supply and so the purpose of the Precor deal is in part to buy Peloton more manufacturing capacity.

“No one would wish a global pandemic on anybody, but it’s been a tailwind for our business,” Lynch has said. “Keeping up with that growth 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.

Peloton will gain 625,000sq ft of factory space in North Carolina and Washington State, US, along with a 100-strong R&D team, in-house tooling and fabrication and a quality assurance set-up, enabling it to shorten time to market for its products, as it's existing manufacturing capacity is mainly in Asia.

Peloton, which hired former Hilton Hotels fitness and spa director, Ryan Crabbe in 2018, already has experience of supplying bikes to the hotel market. Now it's likely to drive this to another level by tapping into Precor's strength in the hospitality sector.

Peloton has also said it plans to make a range of connected fitness for the commercial market before the end of 2021.

It's also likely Peloton will aim to leverage Precor's relationships with its corporate and college customers. Precor has deals with organisations such as EXOS for tech integration, making these sectors a valuable source of sales.

With vaccines now being delivered, as we come out of the pandemic, the company will not be able to ride the boom in the home fitness market forever and may be seeking to broaden its trading base – potentially a sign of confidence in the health and fitness facility market.

However, speaking to Fit Tech magazine earlier this year, Peloton founder, John Foley said "Peloton will always be a B2C company," so perhaps the deal will see Precor pivoted partly to supply the consumer market. Time will tell.

Fundamentally, having manufacturing capacity on either side of the globe, R&D capabilities and access to both the B2B and B2C fitness markets – as well as things such as Precor’s tie up with Sony – puts the business in a position to move in almost any direction it chooses over the next five years.

This isn't Pelton's first acquisition – it bought Tonic Fitness Technology in Taiwan – one of the companies that make its bikes, in 2019. The US$47.4m deal enabled Peloton to better control its manufacturing output. It also bought digital music aggregator Neurotic Media in 2018.

Precor's owner, Finnish sporting goods company Amer Sports, is in turn owned by a group of investors including Chinese sportswear giant Anta Sports, FountainVest Partners, Anamered Investments Inc and Tencent Holdings. There have been rumours of a potential sale for over a year.

FOOTNOTES

The deal comes as Mad Dogg Athletics, inventor of the Spinner bike, has issued court action against Peloton for patent infringements, as reported in HCM's sister magazine, Fit Tech.

Madd Dogg and Precor have an agreement in place going back to 2015 for Precor to produce Spinning branded bikes.

HCM is seeking clarification as to whether Peloton can now use the Madd Dogg brand and whether the court action will be dropped or will proceed.

For a recent interview with Peloton founder, John Foley, in Fit Tech magazine, click here.

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In a surprise move, Peloton – which finished its last financial quarter with US$2bn cash in the bank – has announced it's purchasing commercial fitness giant, Precor.
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