Peloton Shares rose Monday after the company announced it was taking over exercise equipment maker Precor for $ 420 million to expedite production of its bikes and treadmills and meet promised delivery windows.
The stock rose more than 8% in after-hours trading.
Demand for Peloton’s exercise equipment has increased during the coronavirus pandemic and puts a strain on the supply chain as consumers want to exercise at home during the pandemic.
Under the agreement, Peloton will acquire Precor’s Whitsett, North Carolina, and Woodinville, Washington, factories, which together have more than 625,000 square feet of manufacturing space. The deal also strengthens Peloton’s product development efforts by adding nearly 100 research and development employees to the existing workforce.
The transaction is expected to close in early 2021. Upon completion of the transaction, Precor will operate as a business unit within Peloton, the company said.
Precor’s current President, Rob Barker, will become Precor’s CEO and General Manager of Peloton Commercial, reporting to Peloton President William Lynch.
“By combining our talented and dedicated R&D and supply chain teams with the incredibly capable Precor team and decades of experience, we believe we are entering the global networked fitness market in terms of both innovation and Scalability can lead, “Lynch said in a statement.
When Peloton reported quarterly results in November, it warned against it it would operate under supply bottlenecks “for the foreseeable future”. due to the increased demand for its products. Due to the surge in sales, Peloton customers have reported late deliveries and poor service.
Peloton anticipates that Precor, known for its low-end commercial fitness equipment, including elliptical trainers and rowing machines, will bring the combined company to new markets thanks to Precor’s existing relationships with U.S. hotel chains, apartment buildings, and college and corporate campuses . Upon joining Peloton, Precor will continue to sell its existing brands.
As of Monday’s close of trading, Peloton shares are up more than 403% this year, increasing their market cap to $ 42.2 billion.