Scotts Miracle-Gro Continues Acquisition Spree With Two Deals Worth $225M, Lowers Sales Outlook For Hawthorne

Scotts Miracle-Gro SMG reported Tuesday that it has acquired Luxx Lighting, a provider of high-performance cultivation lighting, for $215 million.

The Ohio-based company also announced that it is purchasing True Liberty Bags, the industry's leading provider of liners and storage solutions to dry and cure plant products, for $10 million.

Luxx Lighting Deal

The deal with Los Angeles-based Luxx Lighting significantly strengthens Hawthorne Gardening Company's industry-leading lighting portfolio.

Hawthorne, which previously did not distribute Luxx, will expand the marketing and distribution of the brand in emerging markets, including the East Coast.

The acquisition, which closed on Dec. 30, adds roughly $100 million in sales and $20 million in operating income to Hawthorne on an annualized basis. In addition, around $75 million in revenue from Luxx is expected in the remainder of fiscal 2022.

However, the transaction is expected to be neutral to earnings for the year due to the impact of purchase accounting and one-time deal costs.

"Luxx joins a product lineup that also includes the Gavita and Sun System brands and provides the opportunity for significant cost synergies and process improvements across the portfolio," Chris Hagedorn, division president of Hawthorne said.

"The True Liberty transaction gives us our first offering in this niche market, however, the acquisition of Luxx bolsters a lighting portfolio that is now several times larger and more diverse than our nearest competitor," Hagedorn added. "Luxx has deep roots in the cannabis industry with lights that were designed, tested, and refined in collaboration with the team at Jungle Boys."

True Liberty Deal

The transaction with True Liberty introduces storage solutions directly to the hydroponic market, developing a full offering of liners and storage solutions to dry and cure plant products.

In addition, True Liberty has been the primary U.S. provider of True Liberty brands.

"These strategic acquisitions reinforce our commitment to provide commercial cannabis cultivators in state-authorized markets with a complete set of solutions driven by insight and innovation," Hagedorn noted.

Lower Hawthorne Sales Outlook And Full-Year Guidance

Separately, ScottsMiracle-Gro disclosed that it is maintaining its full-year company-wide outlook for adjusted earnings per share despite a greater-than-expected decline in Hawthorne sales for the fiscal first quarter, which ended January 1.

The company said that it expects first-quarter sales in Hawthorne to drop approximately 40%, mainly due to a slowdown in the cannabis market as well as supply chain disruptions that have delayed the sale of certain product lines.

In addition, U.S. consumer segment sales in the first quarter are expected to decline less than 20%.

More recent news from The Scotts Miracle-Gro Company:

• ScottsMiracle-Gro Helps RIV Capital' Grow Great Things' With $150M Strategic Investment
• Scotts Miracle-Gro To Acquire Rhizoflora's Cannabis Nutrients Business For $33.5M

SMG Price Action

Scotts Miracle-Gro shares traded 0.08% lower at $164.46 per share at the time of writing on Tuesday morning.

Photo: Courtesy of Ryan Lange on Unsplash