ScottsMiracle-Gro to Acquire Sunlight Supply Inc., Marking Major Step Forward in the Evolution of The Hawthorne Gardening Company
Pending acquisition of largest hydroponic distributor in the U.S. will benefit customers while driving growth and synergies that enhance shareholder value
- Combined company will have annualized sales of approximately
$600 millionand directly service more than 1,800 hydroponic retail stores in North America
- Management to launch ‘Project Catalyst’ to drive synergies of
$35 millionand $0.60 to $0.80improvement in non-GAAP adjusted EPS for fiscal 2019
- Transaction valued at
$450 millionincludes $25 millionof SMG equity
- Sunlight management expected to join ScottsMiracle-Gro upon completion of transaction
The transaction will create a direct distribution model for Hawthorne that will service more than 1,800 hydroponic retail customers throughout
Hawthorne, which had 2017 sales of approximately
Among the many benefits of the transaction, Hawthorne will possess the most technologically advanced supply chain in the hydroponic supply industry. By being able to ship directly, Hawthorne will have greatly enhanced relationships with hydroponic retailers, giving it greater visibility into current market trends, retail inventory levels and point-of-sale data that will allow it to operate more effectively.
“We are creating a game-changing moment for ScottsMiracle-Gro, for Hawthorne, the hydroponic products industry and the users of our products,” said
Transaction details and financial implications
In fiscal 2017, Sunlight Supply recorded sales of approximately
In fiscal 2018, the transaction is expected to be dilutive by
Upon completion of the transaction, which is expected by
The Company has set a goal for Hawthorne to achieve segment profit of approximately
“We have been deliberate in the steps we’ve taken thus far in creating the Hawthorne portfolio and made sure not to disrupt the marketplace as we’ve grown,” Hagedorn said. “The pending acquisition of Sunlight Supply now gives us the green light to aggressively optimize the businesses we’ve acquired and create a more efficient business that better serves the needs of consumers and our customers and drives value for our shareholders.”
Terms of the transaction call for ScottsMiracle-Gro to pay
“We are extremely pleased with the financial terms of the transaction,” said
ScottsMiracle-Gro will release complete financial results for its fiscal second quarter on
“The entire hydroponic industry continues to see pressure on sales due to the recent regulatory changes in California,” Hagedorn said. “We now expect the challenges in
Combination creates benefits for the hydroponic growing supply industry
The combination of Hawthorne and Sunlight Supply will create immediate benefits for consumers, retailers, and vendors throughout the hydroponic products industry. Upon completion of the acquisition, Hawthorne will have a fully vertically integrated operating model that will ship directly to retailers, providing unmatched capabilities in the industry. The Company believes the transaction will make Hawthorne the preferred distributor for the majority of other manufacturers in this space.
Synergies from the transaction will allow Hawthorne to invest in improved service, more attractive promotional programs for its retail partners, as well as benefit consumers with unique R&D efforts to improve the effectiveness of hydroponic growing products.
“In deciding to join forces with Hawthorne we were seeking a partner who shared our long-term optimism for this industry and was focused on further improving the experience for our retail dealers and current vendors,” said
Business operations and leadership team
ScottsMiracle-Gro Leadership provides more commentary on acquisition
Parties interested in learning more about the transaction are encouraged to listen to recorded comments made by ScottsMiracle-Gro management. Those comments can be accessed by calling 855-859-2056 (passcode: 4817419) or via webcast by visiting the Company’s investor relations website investor.scotts.com
Forward Looking Non-GAAP Measures
In this release, the Company provides an outlook for non-GAAP adjusted EPS. The Company does not provide a GAAP EPS outlook, which is the most directly comparable GAAP measure to non-GAAP adjusted EPS, because changes in the items that the Company excludes from GAAP EPS to calculate non-GAAP adjusted EPS, described above, can be dependent on future events that are less capable of being controlled or reliably predicted by management and are not part of the Company’s routine operating activities. Additionally, due to their unpredictability, management does not forecast the excluded items for internal use and therefore cannot create or rely on a GAAP EPS outlook without unreasonable efforts. The timing and amount of any of the excluded items could significantly impact the Company’s GAAP EPS. As a result, the Company does not provide a reconciliation of guidance for non-GAAP adjusted EPS to GAAP EPS, in reliance on the unreasonable efforts exception provided under Item 10(e)(1)(i)(B) of Regulation S-K.
Cautionary Note Regarding Forward-Looking Statements
Statements contained in this press release, other than statements of historical fact, which address activities, events and developments that the Company expects or anticipates will or may occur in the future, including, but not limited to, information regarding the future economic performance and financial condition of the Company, the plans and objectives of the Company’s management, and the Company’s assumptions regarding such performance and plans are “forward-looking statements” within the meaning of the U.S. federal securities laws that are subject to risks and uncertainties. These forward-looking statements generally can be identified as statements that include phrases such as “guidance,” “outlook,” “projected,” “believe,” “target,” “predict,” “estimate,” “forecast,” “strategy,” “may,” “goal,” “expect,” “anticipate,” “intend,” “plan,” “foresee,” “likely,” “will,” “should” or other similar words or phrases. Actual results could differ materially from the forward-looking information in this release due to a variety of factors, including, but not limited to:
- Acquisitions, other strategic alliances and investments could result in operating difficulties, dilution, and other harmful consequences that may adversely impact the Company’s business and results of operations;
- Compliance with environmental and other public health regulations or changes in such regulations or regulatory enforcement priorities could increase the Company’s costs of doing business or limit the Company’s ability to market all of its products;
- Disruptions in availability or increases in the prices of raw materials and fuel costs could adversely affect the Company’s results of operations;
- The highly competitive nature of the Company’s markets could adversely affect its ability to maintain or grow revenues;
- Because of the concentration of the Company’s sales to a small number of retail customers, the loss of one or more of, or significant reduction in orders from, its top customers could adversely affect the Company’s financial results;
- Climate change and unfavorable weather conditions could adversely impact financial results;
- Certain of our products may be purchased for use in new or emerging industries or segments and/or be subject to varying, inconsistent, and rapidly changing laws, regulations, administrative practices, enforcement approaches, judicial interpretations and consumer perceptions;
- The Company may not be able to adequately protect its intellectual property and other proprietary rights that are material to the Company’s business;
- In the event the Restated Marketing Agreement for consumer Roundup products terminates, we would lose a substantial source of future earnings and overhead expense absorption;
Hagedorn Partnership, L.P. beneficially owns approximately 26% of the Company’s common shares and can significantly influence decisions that require the approval of shareholders.
Additional detailed information concerning a number of the important factors that could cause actual results to differ materially from the forward-looking information contained in this release is readily available in the Company’s publicly filed quarterly, annual and other reports. The Company disclaims any obligation to update developments of these risk factors or to announce publicly any revision to any of the forward-looking statements contained in this release, or to make corrections to reflect future events or developments.
Senior Vice President
Investor Relations & Corporate Affairs