CANNAINVESTOR Magazine August 2016 - Page 64


Scotts MiracleGro - Cannabis Update

“I remain pleased with the fundamentals of our business and our execution around Project Focus. We have recently completed a second significant acquisition in the hydroponics space and, in recent days, have signed a definitive agreement for a third transaction. These deals will give us a strong leadership position in the fast growing hydroponics industry and total annual sales approaching $250 million for The Hawthorne Gardening Company. As we had promised, we are now beginning the transition away from acquisitions and will begin a more aggressive return of cash to shareholders, through both an increased dividend and share repurchase activity.”

Third Quarter Details - Cannabis Project Focus Update

During the third quarter with the aid of cash received from the joint venture, The Hawthorne Gardening Company acquired a 75 percent stake in Gavita, a Netherlands-based and market-leading manufacturer of lighting and related equipment for hydroponic gardening, for $136 million. Gavita has full-year sales of approximately $100 million, and operating margins that will be accretive to the corporate average. The transaction is expected to be accretive to earnings per share in fiscal 2017.

In recent weeks, Hawthorne also has signed a definitive agreement to acquire Botanicare, an Arizona-based market-leading manufacturer of plant nutrients, plant supplements and growing systems used for hydroponic gardening. Terms of the transaction are not being disclosed at this time and the transaction, which is subject to customary closing conditions, is expected to close by the end of the calendar year. Once the transaction closes, the Company anticipates that Hawthorne will become its own reporting segment.

“Two years ago, we began sharing our vision for the hydroponic category and I’m pleased that we have been able to assemble some of the best brands in the industry,” Hagedorn said. “Our goal is for consumers and retailers in this space to consider our brands valuable to their ongoing success. We are confident in our ability to further expand our product offering, to develop new, complementary and innovative products, improve the operating efficiency of the companies we have acquired, and to enhance shareholder value by participating in this fast growing space.”

3Q16 Update