Former prominent Walt Disney Co. executives Kevin Mayer and Tom Staggs are folding their $300-million investment vehicle into Beachbody, an at-home health and fitness company.
The two executives are betting that digital apps and streaming platforms have become potent lifestyle brands.
Beachbody Co., for example, has 2.6 million subscribers who pay $29 a month to stream workouts and gain access to weight-loss plans, coaching, nutrition plans, supplements and healthy recipes. The Santa Monica company markets P90X as well as other popular exercise regimens.
The deal, announced Wednesday, is a merger of three companies: Beachbody Co. Group, Myx Fitness Holdings and Forest Road Acquisition Corp., the publicly traded investment vehicle that Staggs and Mayer created last fall. The transaction values the combined business at $2.9 billion.
The plan is to take Beachbody public on the New York Stock Exchange under the ticker BODY later this year.
Beachbody is positioning itself as a lower-cost alternative to Peloton Interactive. For example, Myx Fitness sells a digital platform with a stationary bicycle, a heart-rate monitor, coaching plans and a 21-inch video screen that enables users to have a connected workout in their home studio.
Since Peloton’s IPO in September 2019, the company’s value has soared.
Beachbody will continue to be led by Carl Daikeler and Jon Congdon, the company’s co-founders. In 2017, the company agreed to pay $3.6 million to settle a lawsuit brought by the Santa Monica city attorney, which alleged the exercise video maker had automatically charged customer credit cards for subscription renewals, sometimes after so-called free trials. Beachbody agreed to change its sales practices.
Beachbody, in announcing the merger, said that its management and shareholders will roll over their 100% equity stake in Beachbody to the new entity. After the close, Beachbody shareholders will have a stake of about 84% in the combined company.
“We are excited to partner with Forest Road and Myx Fitness, and are humbled by the proven team of executives and industry icons who have stepped forward to support our shared vision,” Daikeler said in a statement. “We have seen incredible digital growth in recent years, which was further fueled in 2020 by a structural and lasting shift in how people embrace health and fitness.”
The former Disney executives looked at more than 50 companies since last fall, when they unveiled their special purpose acquisition company, known as a SPAC, or a “blank check” firm. Such investment vehicles are gaining popularity on Wall Street because they allow major investors to bring in their own investors and cast a wide net for acquisition targets.
In recent years, consumers have been gravitating to connected fitness platforms and streaming services that have on-demand workouts. Then, the business really soared last spring when coronavirus stay-at-home orders prompted fitness buffs to find ways to work out at home.
“These are big market trends,” Staggs said. “They certainly got a COVID lift, but it will go well beyond that. This has really accelerated some trends, and these habits will survive.”
After the deal was announced, Forest Road’s stock climbed 91 cents, or 8.5%, to $11.67 a share Wednesday.
Mayer, in a statement, said Beachbody’s “huge growth in the health and wellness space” as well as its “engagement and retention metrics,” are due, in part, to the “depth of its content library and direct-to-consumer technology capabilities.”
“We think there is a nice fit between their premium content and our experience at Disney,” said Staggs, who will become an advisor in the company.
In addition to the $300 million, Forest Road helped put together additional private financing of $225 million from institutional investors, including Fidelity Management & Research Co. and Fertitta Capital. It will inject that into the business, giving BeachBody $420 million in cash on its balance sheet.
Another former Disney executive, Salil Mehta, serves as chief financial officer of Forest Road. Shaquille O’Neal serves as a strategic advisor. Martin Luther King III and film producers Peter Schlessel and Mark Burg serve as independent directors.