Peloton Interactive has entered into an agreement to acquire Precor, the American producer of fitness equipment products, for $420 million. Precor, which last reported a turnover of close to $450 million in 2018, is a unit of Amer Sports, which has been taken over by a consortium that includes Anta Sports, FountainVest Partners, Anamered Investments and Tencent Holdings. The current exodus from the gyms to connected fitness at home due to the Covid-19 pandemic probably played a role in the transaction.
Precor’s acquisition will provide several benefits for Peloton, a fast-growing company whose chronic supply chain constraints have hindered its attempts both to meet rising demand for its direct-to-consumer fitness solutions and to expand in Europe and other parts of the world. Precor will give it access to a large R&D team of nearly 100 people, a solid manufacturing base in the U.S., entry into the commercial fitness market and a vast international sales network.
A 40-year-old company, Precor is one of the major suppliers of fitness equipment for gyms, particularly those housed in hotels, multi-family residences, and college and corporate campuses. It competes against the likes of Life Fitness, which was recently spun off by Brunswick Corp., and Technogym, which is now making a strong pitch for the growing home fitness market. Headquartered near Seattle, Washington, Precor maintains offices in EMEA, Asia-Pacific and elsewhere in the Americas, and operates in about 100 countries. It runs its own digital platform, called Preva, and a related “fitness cloud” that – with 140,000 connected units at 13,000 fitness facilities – recorded its billionth workout this year.
The company also operates two factories, with about 625,000 square feet between them, in Whitsett, North Carolina, and Woodinville, Washington. The goal for Peloton is to begin producing connected fitness products in the U.S. before 2021 is out. The rest of Peloton’s manufacturing is handled by third parties and at Tonic’s factories in Taiwan. Under an agreement announced in 2015, Precor has manufactured, marketed and sold a line of indoor cycling equipment for Mad Doggs Athletics, a pioneer in bike spinning that recently launched a patent infringement suit against Peloton.
The deal for Peloton’s takeover of Precor is scheduled for completion by early next year. If it goes through, Precor will become a business unit within Peloton. Precor’s current president, Rob Barker, will become chief executive of the unit and general manager of Peloton Commercial. Barker will report to Peloton’s president, William Lynch.
Fenwick & West is serving as legal advisor to Peloton in the transaction, Citi is serving as the sole financial advisor to Amer Sports and its investor consortium, and Kirkland & Ellis is serving as their legal advisor.
Separately, Peloton announced a few days ago that it is going to add more than 100,000 square feet of space by next summer to its head office and campus in the North Texas town of Plano, first opened in 2018 to centralize its operations. The company said it twill continue to hire more employees in sales, field operations and corporate functions.