Peloton to add Precor in $420M acquisition

With no sign that home workouts will fade out any time soon, Peloton cranked up its manufacturing capacity in a big way this week and it picked up a bunch of new fans on Wall Street.

The maker of high-end stationary bikes and accompanying monthly subscriptions said late Monday that it will spend $420 million to acquire Precor, a company whose fitness machines populate hundreds of commercial and hotel gyms.

The acquisition, Peloton’s biggest to date, gives the company its first manufacturing capacity in the U.S., its biggest market, during a pandemic that has people canceling gym memberships and seeking ways to stay fit in the safety of their own homes.

The ability to churn out its bikes as demand exploded this year has been a challenge for the New York City company. The phrase “manufacturing capacity” came up no less than eight times during its earnings conference call last month.

After reporting that sales surged more than 230% in its first quarter, shares tumbled more than 25% after the company warned in that call that it would face supply constraints “for the foreseeable future.”

The Precor deal will go a long way toward addressing those constraints.

Precor has 625,000 square feet of U.S. manufacturing capacity with in-house tooling and fabrication, product development and quality assurance capabilities in Whitsett, North Carolina and Woodinville, Washington.

Peloton can control the entire production process from design to shipping and increase total production scale, while being better able to maintain a high level of product quality.

The deal also comes with 100-person research and development team.