Connected fitness company Peloton, a unicorn famous for its connected-bicycle offering and virtual fitness classes, has acquired Precor, a major manufacturer of commercial fitness equipment, for $420 million. The acquisition is expected to close in early 2021.

WHAT'S THE IMPACT?

The acquisition will allow Peloton to bring much of its manufacturing in house and have more control over the supply chain of its devices and expand its research and development team considerably, adding 100 new staff, according to the company. 

The company has hitherto used third-party manufacturers in Taiwan, but Precor's resources will allow the company to build devices in the United States – specifically in Whitsett, North Carolina and Woodinville, Washington – closer to much of its customer base. Eventually, the company hopes these resources will help the company to scale and increase the availability of its products.

The company wasn't entirely clear on what will happen to Precor's existing suite of products, but at least in the short term Precor will operate as a business unit within Peloton, with Precor president Rob Barker serving as CEO of Precor and general manager for Peloton Commercial, and reporting to Peloton president William Lynch.

THE LARGER TREND

Already a phenomenon, Peloton has responded to the coronavirus pandemic by trying to expand its product line to lower price points, launching more affordable versions of its connected bike and treadmill in September. Having more control over the supply chain and manufacturing could help Peloton to continue in that direction – scaling its operation and widening its addressable market.

For its part, Precor has been venturing into connected fitness since 2013 when it launched a mobile app and an open API, though it hasn't had offerings on the scale of Peloton.

ON THE RECORD

"Precor embodies the Peloton mission of putting Members first," Lynch said in a statement. "Over the last few months, we've gotten to know the team and saw firsthand how much they care about their products, customers and, last but not least, their employees.

"By combining our talented and committed R&D and Supply Chain teams with the incredibly capable Precor team and their decades of experience, we believe we will be able to lead the global connected fitness market in both innovation and scale. We're looking forward to integrating the Precor team into Peloton and excited about what this means for the future of our brand and our ability to continue delivering world-class Member experiences."