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>>> Scotts Miracle-Gro shares slip after $450 million

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gfp927z   Saturday, 04/21/18 02:11:33 PM
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>>> Scotts Miracle-Gro shares slip after $450 million acquisition announced

By Tonya Garcia

Apr 18, 2018


Scotts Miracle-Gro Co. SMG, +0.45% shares are down 2.2% in Wednesday trading after the lawn and garden company announced an agreement to acquire Sunlight Supply Inc., a hydroponics distributor, for $425 million in cash and $25 million in Scotts Miracle-Gro equity upon completion of the deal. The deal will create a distribution model for The Hawthorne Gardening Co., a wholly-owned subsidiary of Scotts Miracle-Gro. Hawthorne had 2017 sales of about $290 million and has a portfolio of brands that includes Gavita and Botanicare. Sunlight has a 350,000-square-foot distribution center in Vancouver, Wa. along with three other North American facilities. Hawthorne Gardening and Sunlight Supply are expected to have about $600 million in annualized sales. In fiscal 2018, the deal is expected to be dilutive by 30 cents to 40 cents per share on an adjusted basis. The company expects to achieve $35 million in financial synergies by the end of fiscal 2019 and incur about $15 million to $20 million in restructuring charges to achieve the synergies. Benefits are expected to improve year-over-year by 60 cents to 80 cents per share on an adjusted basis in fiscal 2019. Scotts Miracle-Gro will announce fiscal second quarter results on May 1. "Strategically, we like the transaction as it fits extremely well with Scotts Miracle-Gro's Hawthorne hydroponics subsidiary," Raymond James analysts wrote in a note. "As with its core U.S. Consumer business, the new vertically-integrated operating model is likely to bring Hawthorne closer to its retailer customers and improve its visibility, while also yielding cost synergies which Scotts Miracle-Gro estimates at $35M by FY19." Raymond James rates Scotts Miracle-Gro market perform. Scotts Miracle-Gro shares are down 22.2% for the year so far while the S&P 500 index SPX, -0.85% is up 1.3% for the period.


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