MARYSVILLE, Ohio–Scotts Miracle-Gro, the venerable lawn and garden company established in 1868, has announced it will acquire leading hydroponics retailer Sunlight Supply Company. In a deal scheduled to be finalized by June 1, Scotts will pay $425 million in cash and $25 million in stock, and bring the American multinational corporation into the cannabis industry space.
“We are creating a game-changing moment for Scotts Miracle-Gro, for Hawthorne, the hydroponic products industry and the users of our products,” Scotts Chairman and Chief Executive Officer Jim Hagedorn said in a statement.
Sunlight will be incorporated under Scotts’ subsidiary The Hawthorne Gardening Company, which is based in New York, though some operations will be relocated to Vancouver, where Sunlight’s HQ is located and where they have recently opened an automated, cutting edge manufacture and distribution facility.
Hagedorn is expected to continue, as general manager at Hawthorne, while Doug Hargreaves, Sunlight Supply executive vice president, will join Hawthorne to head up operations. Sunlight Supply President and founder Craig Hargreaves also is expected to join Scotts Miracle Gro and help develop long-term strategy.
The announcement of the deal saw a three percent drop in Scotts stock (NYSE: SMG), though was trading up slightly on Friday. Some analysts attributed the down response to a recently released profit warning that cited cold weather for delaying the usual start of the spring lawn and garden season.
Another issue that may be spooking investors from picking up Scotts on the downswing may be continuing challenges for cannabis regulation in California. Hagedorn said has affected the entire hydroponics industry.
“We now expect the challenges in California to continue throughout the balance of fiscal 2018. Because our long-term optimism about this category is unchanged, however, we see no reason for these near-term challenges to delay the implementation of our strategy,” he described.
Both Scotts Miracle Gro and Sunlight Supply expressed optimism in the growing cannabis sector, despite industry growing pains, hesitant traders, or bad weather.
“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 Sunlight Supply’s Craig Hargreaves. “This is an innovative and smart combination that allows our industry to take a giant step forward and benefits consumers and all of Sunlight’s current stakeholders. We are truly excited to become part of the Scotts Miracle-Gro family and to partner with Hawthorne in creating the most important company in the hydroponic products industry.”