Business

NordicTrack CEO Scott Watterson forced out in battle with Peloton

The maker of NordicTrack train bikes and treadmills bought a monetary lifeline this month — however solely after the struggling Peloton rival’s founder agreed to step down as chief govt, The Put up has realized.

Buyers insisted that 66-year-old Scott Watterson — a hard-charging billionaire entrepreneur who based the corporate in 1977 after doing a stint as a Mormon missionary in Asia — relinquish management of the day by day administration of NordicTrack’s mother or father firm, iFIT Well being & Health, sources near the scenario mentioned.

IFIT’s new backers likewise demanded management of the board, which meant booting longtime administrators from the Church of Latter-day Saints who had been near Watterson, sources instructed The Put up. Watterson stays chairman — however his wings have been clipped, the sources mentioned.

Michael Phelps invoice

A key beef was over iFIT’s bills, which ballooned over the previous 12 months as Watterson scrambled to outgun archrival Peloton by pouring thousands and thousands of {dollars} right into a advertising push that tapped Olympic swimming legend Michael Phelps.

Some buyers griped that Watterson — who, they declare, ran the corporate like a household enterprise — racked up a large tab with a dangerous plan to pay it off with proceeds from an IPO that ended up getting scrapped in October. IFIT anticipated to lift $650 million within the public providing.

Scott Watterson, CEO of iFIT, based the corporate in 1977.
iFIT Well being & Health

As soon as valued at greater than $10 billion, iFIT final 12 months was compelled to shed lots of of employees in a sequence of layoffs in a bid to gradual its money burn as pandemic-driven demand for train bikes from NordicTrack and Peloton alike dried up final fall.

Each firms had been slowed down in patent lawsuits in opposition to one another in addition to different health firms.

One supply near the corporate now pegs iFIT’s market worth nearer to $1.5 billion.

“It wanted a recent set of eyes and for somebody to handle the enterprise professionally,” one supply near the corporate instructed The Put up.

The buyers – L Catterton and Pathlight Capital – wished assurances that new management could be put in earlier than they parked their thousands and thousands within the Logan, Utah-based firm, in accordance with the supply. They’re now in discussions with candidates to succeed Watterson as CEO, the supply mentioned.

It’s a unique story than the one iFIT instructed after it secured the $355 million funding in early March, asserting that Watterson could be stepping down as CEO “as beforehand deliberate.”

His 35-year-old son Mark, who’s chief expertise officer, was promoted to co-president together with iFIT’s chief monetary officer, Steve Barr.

Headshots of Scott Watterson's sons, Mark, Blake and Eric.
Scott Watterson’s sons, Mark, Blake and Eric have senior positions within the firm. A fourth, son, Nick, isn’t pictured.
iFit

‘So many Wattersons’

The shuffle follows investor complaints that Watterson ran iFIT like a fiefdom –in accordance with one supply, Scott has been recognized to “gown down his staff in entrance of the board of administrators” — and he doled out plum gigs to 11 members of the family, in accordance with public filings. 

Certainly, Scott himself was poised to obtain $35 million upon completion of the IPO, which was finally postponed as a result of “adversarial market circumstances,” in accordance with securities filings. The flopped IPO didn’t cease iFIT from forgiving $53.2 million price of loans to member of the family staff proper earlier than the corporate’s IPO registration, filings present.

“iFit is a billion-dollar firm, however for those who have a look at the names of the executives there are such a lot of Wattersons within the C-suite,” one other supply with information of the funding phrases mentioned.

Watterson’s 62-year-old brother David, previously chief technique officer, is not a director nor does he maintain an govt place. It’s Scott’s son Mark that Watterson hopes will take the reins of the corporate finally, the sources mentioned.

A woman using a NordicTrack bike in a livingroom.
NordicTrack train tools competes immediately with Peloton.
NordicTrack

His three different sons — Blake, chief working officer; Eric, chief advertising officer; and Nick, a product supervisor; will proceed of their roles and are properly regarded by the buyers, however aren’t but considered as CEO materials, sources mentioned.

Pathlight invested $325 million and L Catterton – backed by French luxurious big LVMH’s billionaire chairman Bernard Arnault – invested $25 million, in accordance with a supply near the corporate. Scott Watterson, who’s price $1.6 billion in accordance with Forbes, invested $5 million, the supply mentioned. Pathlight didn’t reply to requests for remark and L Catterton declined to remark.

IFIT didn’t reply to repeated requests for remark.

‘Mormon brotherhood vanished’

As solely reported by The Put up, iFIT was dealing with down a possible chapter this 12 months as a result of a lawsuit from Pamplona Capital Administration, which had demanded instant reimbursement of a 2019, $200 million mortgage and $100 million in curiosity, alleging that iFIT minimize a deal to amass a Chinese language producer that subordinated Pamplona’s mortgage to the corporate and violated the phrases of its settlement with iFIT.

IFIT this month mentioned it settled the dispute with out disclosing particulars. Sources mentioned the settlement was the important thing to unlocking the $355 million as Pathlight and L Catterton didn’t need the legal responsibility hanging over the corporate.

L Catterton has successfully taken over the administration for now — and was doubtless the explanation that Scott agreed to the management modifications, citing friction between Watterson and Pamplona, in accordance with a supply.

A woman working out in front of an interactive mirror.
Demand for at-home train tools spiked throughout the pandemic, however took a tumble late final 12 months.
Proform

The board, in the meantime, has been shrunk, with L Catterton holding three seats and the rights to put in three impartial administrators. Gone are two high-ranking members of the Mormon church: Gary Stevenson, who’d co-founded iFIT and is now the twelfth Apostle of the church; and Bob Homosexual, an funding banker who additionally has held church management positions. IFIT administrators had been instructed to discuss with Stevenson as “Elder Stevenson” at board conferences, the supply instructed The Put up.

“All that Mormon brotherhood vanished from the board,” the supply mentioned. “They had been a giant problem. All of them caught collectively and saved propping Scott up,” the supply mentioned.

Watterson and Stevenson served as Latter-day Saint missionaries in Asia earlier of their careers and fashioned the health firm — then referred to as Weslo Inc. — collectively in 1977. Watterson speaks fluent Mandarin, in accordance with Forbes.

When iFIT introduced plans to go public final fall, the native press identified that Stevenson may change into a billionaire within the course of. The Salt Lake Tribune additionally identified that serving on a company board “would seem to violate long-standing church coverage.”

A church spokesperson responded that Stevenson had obtained a particular dispensation from church authorities, “ensuing from his legacy shareholdings and his position as a co-founder of the company.”

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