Peloton will spend nearly a half billion dollars on an acquisition to help it better keep up with demand for its popular bikes and treadmills. As announced in a press release, Peloton will acquire the exercise equipment manufacturer Precor for $420 million, with the deal expected to close in early 2021.
Through the deal, Peloton will acquire Precor factories in North Carolina and Washington, which boast a combined 625,000 square feet of manufacturing space. This will allow Peloton to establish US manufacturing capacity and control the entire production process, from designing to shipping.
Peloton also says that this will increase total production scale:
The acquisition adds 625,000 square feet of US manufacturing capacity with in-house tooling and fabrication, product development, and quality assurance capabilities in Whitsett, North Carolina and Woodinville, Washington. Peloton will be able to control the entire production process, from design to ship, and increase total production scale, while maintaining a high level of product quality. By making fitness equipment closer to US consumers, Peloton will be able to deliver connected fitness products to Members sooner.
Peloton will also add nearly 100 research and development employees to its staff through the deal. The Precor research and development team will “work with the Peloton R&D team to design and create the next generation of connected fitness experiences,” Peloton says.
Finally, the acquisition will allow Peloton to expand to more commercial fitness customers through Precor’s existing partners:
Precor is one of the largest commercial fitness equipment providers in the world and has 40 years of experience and expertise building a customer-focused business at scale. Under the Peloton umbrella, Precor plans to make the award-winning Peloton experience accessible to more people through its long-standing relationships with hotels, multifamily residences, and college and corporate campuses. Precor will also continue to service its global network. When the transaction closes, the parties plan to make Peloton connected fitness products available to Precor’s broader network of commercial customers in Peloton’s existing markets.
Peloton has been unable to keep up with demand for all of its products this year, due in large part to the boost it has seen from people working out from home amid the COVID-19 pandemic. Currently, Peloton Bike orders are shipping within 4 to 8 weeks, while Bike+ orders are backordered by over 10 weeks. Peloton will begin selling a lower-cost Tread in March 2021, and the existing Tread+ is backordered by four to seven weeks.
The acquisition of Precor comes after Peloton acquired one of its Taiwanese bike manufacturing partners for $47.4 million last year. The Precor acquisition, however, is much larger in scope.