Forest Road Acquisition Corp (FRX) closes in on $2.9 Billion merger

In early February, The Beachbody Company announced its intentions to merge with both Forest Road Acquisition Corp. (NYSE: FRX) and Myx Fitness in a reverse merger. The merger will see the combined company trading on the NYSE under the ticker “BODY”. Upon completion of the merger, Beach Body Company will be the parent company of Beachbody On Demand (BOD), Openfit and Myx. The merger is valued at $2.9 Billion and will add a $420 million cash injection into the combined business. Investors are excited about this prospect, as the combined company will be directly competing with digital fitness giant Peloton. With the merger set to close on the 25th of June assuming approval from shareholders, this article will breakdown everything investors need to know.

Key details on Forest Road Acquisition Corp (NYSE:FRX) merger

  • Firstly, the transaction is expected to close on June 25th after the approval of shareholders.
  • The combined company will be listed on the NYSE under a new ticker symbol, “BODY”.
  • Across the combined companies, the estimated revenue for 2020 equates to $880 Million (pro-forma).
  • The Beachbody Company noted the combined company is well-positioned to unlock accelerated growth. In addition, the company expects to achieve compound annual revenue growth of 30% over the next 5 years.
  • The merger will need to be approved by FRX shareholders prior to completing the transaction. The shareholder vote is one of the last steps in the SPAC merger process.

“When we raised our SPAC, we were determined to find a company with a strong, proven business model and significant growth potential where we could add value from our experience in the creation and monetization of premium content. Beachbody is a perfect fit with those objectives,”

said Tom Staggs, former COO & CFO of Disney and Forest Road board member and strategic advisory committee chair.
Digital Fitness industry expected to be worth $59 Billion by 2027

Why are investors excited about The Beachbody Company (NYSE:BODY)

Firstly, The Beachbody Company has been able to position their brand effectively in areas such as digital subscription, consumer health and connected fitness. The company boasts 2.6 million paid digital subscriptions, which surged 30-40% as a result of COVID-19. Furthermore, current forecasts suggest the online fitness industry will grow to $59 Billion in market value by 2027. However, investors are excited about the strong revenue opportunities the combined company can bring to the table.

Looking forward into 2021, the combined company expects to generate $1.11 Billion in revenue and grow to 3.7 Million digital subscriptions. In addition, the company expects revenue to grow to $1.4 Billion in 2022 and $1.95 Billion by 2023 (representing YOY growth of 30%). By 2025, the company expects to generate upwards of $3.29 Billion and amass 10.9 million digital subscribers. (See above data from The Beach Body’s Investor Presentation)

The risks involved with SPAC mergers

Firstly, it’s important to note the forecasts above are a reflection of a successful merger and future variables taking place. In contrast, we have seen the volatility the stock has experienced over the past few months. The stock price initially surged to a 52 week high of $18.20 before dropping below $10 in early April. Therefore, investors should always tread with caution and can expect future volatility as the company closes in on the merger. However, most SPAC companies are now trading at 52 week lows, suggesting positive upside from the current trading price.

Summarising the FRX merger

In conclusion, the merger looks to be an exciting new chapter for all three companies involved. The strategic positioning of the combined company looks to be a real threat to its competition including Peloton. In addition, the 30% YOY growth in revenue over the next 4 years is a green light for long term investors. However, the associated risk with SPAC companies in the current market does expose investors to additional volatility.

Written by Tyger Fitzpatrick at Youth Investment Group.

The information above is not financial advice. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.

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