Peloton Buys Precor for $420 Million…Nice

Peloton Interactive Inc. executives and employees ring the opening bell September 26, 2019 at the Nasdaq MarketSite in New York

Peloton is purchasing the fitness equipment provider Precor for $420 million in cash from Finnish sporting goods company Amer Sports. The deal will give the manufacturer of connected bikes and treadmills U.S. manufacturing capacity for the first time.

Peloton [$PTON] expects to be producing connected fitness gear in the U.S. market before the end of 2021. Which will be music to the ears of both investors and customers, given that recent product shortages have resulted in long delivery delays throughout the pandy.

Precor will operate as a separate business unit within Peloton, with current Precor President Rob Barker as sitting CEO and reporting to Peloton President William Lynch. Amer Sports is owned by an investor group that includes ANTA Sports, FountainVest Partners, Anamered Investments and Tencent.

“Precor embodies the Peloton mission of putting members first,” Peloton’s Lynch said. “By combining our talented and committed [research and development] 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’s hardware segment revenue could have grown even more. Right now, the company has a backlog of $230 million in Peloton Bikes alone. The company simply couldn’t deliver all the Bikes because of unexpectedly high demand coupled with tricky COVID-19 logistics.

Peloton says the deal will add 625,000 square feet of U.S. manufacturing capacity in Whitsett, North Carolina, and Woodinville, Washington. The company said that “by making fitness equipment closer to U.S. consumers, Peloton will be able to deliver connected fitness products to members sooner.”

The company said the deal also adds a team of nearly 100 committed research and development staff. Peloton said it plans to leverage Precor’s long-standing relationships with hotels, multifamily residences, and college and corporate campuses to squeeze Peloton hardware into those markets.

Peloton had about $2 billion in cash and marketable securities on its balance sheet as of September 30. Investors seem to like the news as shares, which rallied 3.3% to $144.39 in the regular session, have tacked on another 8.6%, to $156.85 in after-hours trading Monday.

Peloton stock is up over 200% year to date.

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