A Peloton bike inside a showroom in New York, US on Wednesday, November 1, 2023. Peloton Interactive Inc. is scheduled to release earnings data on Nov. 2.
Michael Nagel | Bloomberg | getty images
Many private equity companies are considering buying it peloton As the connected fitness company tries to refinance its debt and get back to growth after 13 consecutive quarters of losses, CNBC has learned.
In recent months, the pandemic darling has held talks with at least one firm as it considers going private, people familiar with the matter said. The firm’s current level of interest in acquiring Peloton is unclear. Several other private equity firms are circling Peloton as an acquisition target, but it’s not clear whether they have held formal discussions.
The companies have focused on how to cut Peloton’s operating expenses to make a buyout more attractive. Last week, Peloton announced a sweeping restructuring plan that is expected to reduce its annual run-rate expenses by more than $200 million by the end of fiscal 2025.
Peloton shares rose more than 17% in premarket trading after the CNBC report was published.
There is no guarantee that the deal will go through and that Peloton can remain a public company. People said this on the condition of anonymity because the conversation is personal.
A Peloton spokesperson declined to comment on CNBC’s reporting.
“We do not comment on speculation or rumors,” the spokesperson said.
Peloton has become a takeover target after seeing its market capitalization fall from a high of $49.3 billion in January 2021 to about $1.3 billion as of Monday.
Peloton has a consistent and profitable subscription business with millions of loyal users, but that business has been disrupted by the tools that originally made it a household name. The company’s bikes and treadmills are expensive to make and have been the subject of Numerous, high-profile recalls which has driven members away from the brand Peloton is worth lakhs,
Additionally, as many consumers of all income groups hold back from big-ticket purchases, there is limited demand for home exercise equipment, which can cost thousands of dollars.
Over the past two years, Peloton has been on a downward spiral as it struggled to grow sales, generate free cash flow, and navigate its way to profitability. Demand for its hardware has fallen and its costs have become too high for a company of its size.
Last week, Peloton announced that CEO Barry McCarthy would be stepping down after it released a disastrous earnings report that missed Wall Street expectations. The same day, it announced plans to cut its staff by 15%, or about 400 employees, explaining that “it had no other way to bring its expenses in line with its revenues.”
The savings Peloton will realize from the restructuring will primarily come from layoffs as well as cuts in marketing, research and development, IT and software. The cut will make it easier for Peloton to generate sustained free cash flow, which executives said can be achieved even without sales growth, and will make it more attractive to private equity firms that are interested. Keep.
Peloton also has a debt burden. Its total debt as of March 31 was about $1.7 billion. The company has $692.1 million outstanding on its term loan, which matures in November 2025, and $991.4 million outstanding on its 0% convertible senior notes, which are due in February 2026. Review of Peloton’s most recent quarterly securities filings.
Last week the company said it was working closely with its lenders. JP Morgan And Goldman Sachs On “Refinancing Strategy”.
“Overall, our refinancing goals are to shorten and extend maturities at an appropriate blended cost of capital,” the company said. “We are encouraged by the support and incoming interest from our existing lenders and investors and we look forward to sharing more about this topic.”
A source close to the company said Peloton is not expected to have any problems refinancing its debt.