Several private equity firms are considering a potential buyout of Peloton in an effort to help the connected fitness company refinance its debt and return to growth following several quarters of losses. There have been discussions with at least one firm about the possibility of taking Peloton private, although the current level of interest is unclear. While other private equity firms have shown interest in acquiring Peloton, it is uncertain if formal discussions have taken place. The potential buyout is focused on reducing Peloton’s operating expenses to make the company more attractive to investors.
Peloton recently announced a broad restructuring plan that aims to decrease its annual expenses by over $200 million by the end of fiscal 2025. This has led to a surge in Peloton’s stock value, with shares rising over 15% after the news was reported by CNBC. Despite the positive response from investors, there is no guarantee that a deal will be reached, and Peloton may ultimately remain a public company. The discussions regarding the potential buyout have been held in private, with a Peloton spokesperson declining to comment on the rumors circulating about the company.
Peloton has become a takeover target due to a significant decline in its market capitalization, falling from $49.3 billion in January 2021 to approximately $1.3 billion as of the recent announcement. While the company has a profitable subscription business with a large user base, its hardware, including bikes and treadmills, are expensive to manufacture and have been plagued by recalls and diminishing demand. These challenges have hindered Peloton’s ability to grow sales, generate free cash flow, and achieve profitability.
The recent departure of CEO Barry McCarthy and the announcement of layoffs impacting 15% of Peloton’s workforce are part of the company’s efforts to align its spending with revenue. The restructuring plan includes cuts to various areas such as marketing, research and development, and IT, in addition to layoffs. These measures aim to help Peloton generate sustained free cash flow and make the company more appealing to potential investors, including private equity firms interested in acquiring the company. Peloton’s substantial debt has also been a significant concern, with plans in place to work closely with lenders to establish a refinancing strategy.
Despite the challenges faced by Peloton, the company is not expected to encounter difficulties in refinancing its debt. The company owes a significant amount in term loans and convertible notes, which are set to mature in the coming years. Peloton is focused on deleveraging and extending maturities at a reasonable cost of capital as part of its refinancing goals. The company has expressed confidence in its ability to secure support from lenders and investors for the refinancing strategy. The potential buyout of Peloton by private equity firms could provide the company with the resources and restructuring needed to overcome its current financial struggles and pave the way for future growth and profitability.
