Peloton Interactive Inc. – the first pandemic home fitness darling that turned potential takeover target after a sharp fall in its share price – could find a difficult climate if it opts for a deal with a large technology company.
Regulatory review is key. There’s a big deal chill right now in Washington, where tech companies are under investigation by regulators for their reach and influence and the Federal Trade Commission recently sued to block a takeover by Nvidia Corp.
“The deal is better than the headache of the company because they’re going to be vetted on everything they buy,” Anurag Rana, senior analyst at Bloomberg Intelligence, said in an interview on Sunday.
The peloton is assess interest of potential suitors and is working with an adviser to explore options, according to people familiar with the matter who asked not to be identified because the discussions are private. The takeover of the New York-based exercise bike and treadmill maker is exploratory and may not result in a transaction, they said.
The companies expected to take a look at Peloton — whether for an acquisition, investment, or some other type of tie-up — include some of the biggest names in tech and fitness. Amazon.com Inc. has been talking with advisers about a potential deal, The Wall Street Journal reported Friday. Analysts have also speculated that Apple Inc. could be a potential buyer. Nike Inc. is also considering a bid for Peloton, according to the Financial Times.
Peloton did not immediately respond to an email seeking comment. Amazon, Nike and Apple declined to comment.
Peloton shares have fallen more than 80% from their January 2021 high in the middle of a downturn after the easing of pandemic restrictions. It’s a very different landscape from the early days of the pandemic, when demand for the company’s products exceeded supply.
The company is valued at just over $8 billion, based on Friday’s official market close of $24.60 – below its September 2019 initial public offering price of $29. Shares jumped as much as 43% in extended trading on Friday after the Journal report.
Activist investor Blackwells Capital issued a letter last month demanding that the firm’s co-founder and chief executive, John Foley, be fired and pursue a sale. Blackwells said in the letter that potential buyers could include Apple, Nike and Walt Disney Co.
In a short note on Friday, Poonam Goyal, principal analyst at Rana and Bloomberg Intelligence, said Peloton would “only serve as a distraction” for Amazon — while offering little synergy for a cloud- and logistics-focused company. An athleisure business, they said, “would be better suited”.
“Sportswear brands are already embodying the workout scene through runs etc,” Goyal wrote in an email Sunday. “Having a training machine that can integrate their ambassadors and articles could help them establish themselves more in the active community. Lululemon bought Mirror for the same reason.
Although Peloton is already among the leaders in home fitness, a wider variety of products could help it recover demand, Amine Bensaid, another Bloomberg Intelligence analyst, said Sunday.
Apple and Peloton might seem like a good match because Apple is already pushing fitness further, but even with that there are potential downsides. Peloton’s bulky and expensive hardware doesn’t fit Apple’s traditional product rotation strategy, and it has its own fitness software.
Even so, Wedbush Securities analyst Dan Ives said Apple may have strategic reasons to consider a lawsuit from Peloton.
“Apple could be forced into this deal if Amazon, Nike or potentially Disney aggressively tackle Peloton in a strategic defensive blocking move,” Ives wrote in a note Sunday. “On the offensive front, Apple, through its Fitness+ subscription service and Apple Watch strategy, would be able to leverage Peloton’s services and flywheel to significantly bolster its health initiatives, which have been a key strategic pivot.”
Bloomberg writers Mark Gurman and Liana Baker contributed to this report.