Several private equity firms are considering acquisitions Peloton The connected fitness company hopes to refinance its debt and return to growth after 13 consecutive quarters of losses, according to CNBC.
The pandemic darling has been in talks with at least one company in recent months as it considers going private, people familiar with the matter said. The company’s current level of interest in acquiring Peloton is unclear. A number of other private equity firms have also targeted Peloton, but it’s unclear whether they have held formal discussions.
The company has focused on how to cut Peloton’s operating expenses to make an acquisition more attractive. Last week, Peloton announced a broad restructuring plan that is expected to reduce its annual operating expenses by more than $200 million by the end of fiscal 2025.
Peloton’s stock price surged more than 18% in premarket trading following the CNBC report.
There’s no guarantee a deal will go through, and Peloton may remain a public company. The people spoke on condition of anonymity because the talks were private.
A Peloton spokesman declined to comment on the CNBC report.
“We do not comment on speculation or rumors,” the spokesman said.
Peloton has become a takeover target as its market capitalization plummeted from a high of $49.3 billion in January 2021 to about $1.3 billion as of Monday.
Peloton has a stable and profitable subscription business with millions of loyal users, but the business has been hampered by the devices that made it a household name in the first place. The company’s bikes and treadmills are expensive to make and have been the subject of numerous high-profile recalls that have stopped members from buying the brand and cost Peloton millions of dollars.
Additionally, there is limited demand for home fitness equipment worth thousands of dollars as many consumers across all income groups cut back on big-ticket purchases.
Peloton has been on a downward trajectory over the past two years as it struggled to grow sales, generate free cash flow and chart a path to profitability. Demand for its hardware has declined and its costs are too high for a company of this size.
Last week, Peloton announced that Chief Executive Barry McCarthy would resign after the company delivered a disastrous earnings report that fell short of Wall Street expectations. On the same day, the company announced plans to lay off 15% of its workforce, or about 400 employees, explaining that “it simply has no other way to align its expenses with revenue.”
The savings Peloton generates through the restructuring will come primarily from layoffs, as well as cuts in marketing, research and development, IT and software. The cuts will make it easier for Peloton to generate sustained free cash flow, which executives say it can achieve even without sales growth, and will make it more attractive to private equity firms interested in it.
Debt is also weighing on Peloton. As of March 31, the company’s total debt was approximately $1.7 billion. Expires in February 2026.
Last week, the company said it was working closely with lenders JPMorgan and Goldman Sachs About “Refinancing Strategy”.
“Overall, our refinancing goals are to deleverage and extend maturities at a reasonable blended cost of capital,” the company said. “We are encouraged by the support and interest from our existing lenders and investors, and we look forward to sharing information about this More information on the topic.”
A source close to the company said it doesn’t expect any problems refinancing Peloton’s debt.
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