Peloton Interactive Inc., which became the darling of fitness freaks at home during the pandemic, has now become the potential target for taking over after its share prices plunged sharply. The issue is that the company could face a challenging climate if it goes for a deal with a top Technology firm.
Regulatory scrutiny is the key challenge. Presently, large transactions are getting probed by the authorities in Washington. Tech companies are being investigated for influence and reach. Recently, Nvidia Corp. was blocked for an acquisition by the Federal Trade Commission.
As per Bloomberg News, Peloton evaluates the various proposals it has received from potential suitors and is working with advisors to explore options according to people familiar with the matter. The takeover interest is exploratory at this stage and may not lead to a transaction.
Some of the biggest fitness and technology names interested in Peloton as investors or acquisition or some tie-up includes Amazon.com Inc. Analysts have also speculated whether Apple Inc could be another interested buyer. Nike Inc. is also considering to bid for Peloton separately as per Financial Times.
Peloton shares have slumped more than 80% since January 2021 high, after the slowdown following the easing of pandemic restrictions. The landscape is different today than during the early pandemic days when demand exceeded supply.
Peloton is currently valued at just over $ 8 billion based on its closing price on Friday at $24.60. This was below the September IPO price of $ 29. The shares surged by 43% Friday after the Journal report.
Blackwell’s Capital LLC, an activist investor, issued a letter demanding it to sack its CEO and Co-founder John Foley and look for a sale. Blackwell’s said that the protentional buyers could include Nike, Walt Disney, or Apple Inc.
According to a note by Senior Analyst with Bloomberg Intelligence, Poonam Goyal, the acquisition of Peloton would be a distraction for Amazon Inc. and would offer very little synergy for a company focused on logistics and cloud. A leisure company would be a better fit as a buyer for Peloton.
Peloton is a leader in home fitness. A greater product variety could help the regenerate demand, as observed by Amine Bensaid analyst, with Bloomberg Intelligence.
Peloton and Apple Inc appear to be a good match as Apple pushes into fitness. However, there are drawbacks such as Peloton’s large hardware, which is expensive, is not keeping in line with apples own fitness software and product turnover strategy.
Dan Ives, an analyst with Wedbush Securities, wrote that Apple might have strategic reasons to pursue Peloton in a note. If Nike, Amazon, or Disney pursues Peloton aggressively, then Apple Inc may be forced into the deal in a defensive blocking move. On the offensive side, Apple, via its Fitness+ subscription service and strategy of Apple Watch, would leverage Peloton services.
