Peloton Acquisition Target : Schwinn Bicycle Company
With Lululemon’s (LULU) acquisition of Mirror, Nautilus(Schwinn's parent) stands in line as the next high-profile acquisition target.
Among the wide array of suitors, Peloton may serve as the most viable option. With a $35 billion market capitalization, Peloton’s shareholders would be minimally diluted while its stock is used to fund the acquisition.
Recently, Nautilus has suffered from margin compression due to inflationary pressures on their raw materials. Peloton’s size would help alleviate those pressures, and consequently yield tremendous synergies for the combined companies.
Additionally, Nautilus has an established retail distribution network, which may introduce a wider consumer market to Peloton.
Although Mirror was acquired by LULU at 5x revenue and Peloton is currently trading at 11x revenue, Nautilus is trading at only 0.6x revenue. At 1x revenue, Nautilus trades for $30.
Nautilus has considered technology and recurring revenue through membership as their future plans.
As a former Microsoft executive, Nautilus’ CEO Jim Barr has embraced technology. Barr plans to use Nautilus’ recognizable fitness brand as a driver for membership sign-ups. If you are already a loyal Schwinn bike man, why not try their subscription service?
In essence, Barr is trying to replicate the streaming play for fitness brands: recurring revenue through annual subscription memberships. This is exactly the practice of diverse revenue streams that Wall Street loves.
Previously, Nautilus has had to rely on the economic swings of the consumer’s desire for at-home fitness equipment, understandably a major capital expenditure for a household. Nonetheless, with Peloton as its parent organization, Nautilus may witness increased consumer interest and revenue.
Written by Avhan Misra