Peloton's share prices jumped on Monday after the company said that it was planning to acquire exercise equipment manufacturer Precor. The company said that it has reached an agreement to acquire the manufacturer for $420 million.
Peloton's stock jumped by more than 6% on Monday after the company announced the deal. The stock closed at $144.39 per share from a Friday close of $140 per share. Since the start of the year, Peloton's shares have surged by more than 403%. It currently has a market capitalization of around $42.2 billion.
Peloton said that the acquisition is meant to speed up the production of its own cycle and treadmill products to meet the increased demand. Under the deal, Peloton will be taking over Peloton's factories in North Carolina, Woodinville, Washington, and Whitsett.
The factories have a combined manufacturing space of more than 625,000 square feet. Apart from increasing its manufacturing capacity, the acquisition will also increase Peloton's product development capabilities through the addition of close to 100 research and development 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," Peloton said in a statement.
Peloton said that it expects the deal to be closed by early 2021. Once it is closed, Precor will be established as a separate business unit under Peloton. Precor's president, Rob Barker, will be placed as Peloton Commercial's new general manager and the CEO of the new business unit. He will be reporting directly to Peloton's president, William Lynch.
During its latest earnings report, Peloton said that it was experiencing supply constraints and will likely continue to do so "for the foreseeable future." The company said that it has been receiving an increase in orders for its products since the pandemic began.
Peloton's customers have reported delays in shipments, with some expressing their disappointment in the company's poor service.