Peloton Interactive strikes a £314.65 million deal to acquire Precor

In an announcement on Monday, Peloton Interactive Inc. (NASDAQ: PTON) said it will acquire Precor for £314.65 million – a move that will ramp up its manufacturing capacity in the United States and expand its footprint in fitness products.

Peloton shares jumped roughly 10% in premarket trading on Tuesday and gained another 3.5% on market open. At £121 per share, the U.S. company is now more than 425% up year to date in the stock market – a good news for growth investors. In March, Peloton traded at an all-time low of £14.62 per share.

Streaming exercise services saw robust demand amidst COVID-19

Peloton also highlighted on Monday that streaming exercise services have been in great demand in recent months as the Coronavirus pandemic restricted people to their homes. According to the company’s president, William Lynch:

“We have seen a ton of growth. No one would wish a global pandemic on anybody, but it’s been a tailwind for our business. Keeping up with that growth, which has been a moving target, has been a big company priority. As we’ve been investing in scaling our manufacturing, this is an area where Precor is very strong.”

Owing to the sharp increase in demand, however, CEO John Foley said in November that customers were facing unacceptably long wait time on purchase of several products. The acquisition is expected to boost Peloton’s manufacturing capacity in the U.S. by 625 thousand square feet that will help it deliver products much sooner in the future.

Peloton expects the deal to close early in 2021

Peloton said earlier in December that it expanded Plano campus by more than 100 thousand square feet. According to the American exercise equipment and media company, the Precor acquisition – that marks its largest deal in history – is likely to close in the first few months of 2021. Following the completion of the transaction, Peloton will get to add corporate campuses, colleges, and hotels to its customer base as well.

In a report published in September, Peloton said that its sales jumped an unprecedented 172% in the fiscal fourth quarter.

Peloton debuted on the Nasdaq Stock Exchange in September 2019 at a per-share price of £18.91. It, however, closed the year at a higher £21.75 per share. At the time of writing, the New York-based company is valued at £35.29 billion and has a price to earnings ratio of 1,343.53.