Several private equity firms have been considering the purchase of Platoon As the connected fitness company looks to refinance its debt and return to growth after 13 consecutive quarters of losses, CNBC has learned.
In recent months, the pandemic darling has had talks with at least one company as it considers going private, people familiar with the matter said. The company's current level of interest in acquiring Peloton is unclear. Several other private equity firms have been considering Peloton as an acquisition target, but it is unclear if they have held formal talks.
The companies have focused on how to reduce Peloton's operating expenses to make the purchase more attractive. Last week, Peloton announced a sweeping restructuring plan that is expected to reduce its annual expenses by more than $200 million by the end of fiscal 2025.
Peloton shares soared more than 18% in premarket trading after the CNBC report was published.
There is no guarantee a deal will be reached and Peloton could remain a public company. The people spoke on condition of anonymity because the conversations are private.
A Peloton spokesperson declined to comment on CNBC's reporting.
“We do not comment on speculation or rumours,” the spokesperson said.
Peloton has become an acquisition target after seeing its market capitalization fall from a high of $49.3 billion in January 2021 to around $1.3 billion on Monday.
Peloton has a consistent and profitable subscription business with millions of loyal users, but the business has been hamstrung by the team that originally made it a household name. The company's bikes and treadmills are expensive to manufacture and have been the subject of numerous high-profile recalls that have alienated members of the brand and cost Peloton millions.
Additionally, as many consumers across all income groups retire their big-ticket purchases, demand for home exercise equipment that can cost thousands of dollars is limited.
Over the past two years, Peloton has been on a downward trajectory as it struggles to grow sales, generate free cash flow, and chart a path to profitability. Demand for its hardware has fallen and its costs have been too high for a company its size.
Last week, Peloton announced that CEO Barry McCarthy would resign after releasing a disastrous earnings report that fell short of Wall Street's expectations. The same day, he announced plans to cut his staff by 15%, or about 400 employees, explaining that he “simply had no other way to align his expenses with his income.”
The savings Peloton will generate from the restructuring will come primarily from layoffs, along with 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 can be achieved even without sales growth, and will make it more attractive to private equity firms that have been interested in it.
Debt has also weighed on Peloton. His debt totaled about $1.7 billion as of March 31. The company owes $692.1 million on its term loan, which could mature in November 2025, and $991.4 million on its 0% convertible senior notes, which mature in February 2026, according to a review of Peloton's most recent quarterly stock filing.
Last week, the company said it is working closely with its lenders on JPMorgan and Goldman Sachs on a “refinancing strategy”.
“Overall, our refinancing objectives are to deleverage and extend maturities at a reasonable combined cost of capital,” the company said. “We are encouraged by the support and interest from our existing lenders and investors and look forward to sharing more on this topic.”
A source close to the company said Peloton is not expected to have problems refinancing its debt.
