(Photo Credit - Mike Mozart)
The Scotts Miracle-Gro Company (NYSE: SMG) is the world’s leading marketer of branded consumer lawn and garden products. Yesterday, the company filed an 8-K with the SEC announcing that it has completed the previously announced sale of most of its international consumer businesses to Exponent Private Equity, LLP.
The transaction includes ScottsMiracle-Gro operations in Australia, Austria, Belgium, France, Germany, Poland and the U.K.
Jim Hagedorn, CEO of SMG commented, “The divestiture of both Scotts LawnService and our International consumer businesses allow us to increase our focus on our core brands in the U.S. as well as adjacent higher-growing businesses like Hawthorne Gardening Company. The integration of acquisitions under the Hawthorne umbrella is proceeding as planned and we are in the closing stages of completing the acquisition of a marquee brand in another category of hydroponics. Our goal remains the same: to create the world’s most successful hydroponic gardening business.”
As a result of the International divestiture, company-wide operating margins are expected to improve approximately 125 basis points. However, the transaction is expected to dilute earnings per share by about $0.15 in the current fiscal year, effectively reducing the company’s previously stated earnings guidance by that amount. The dilution is slightly lower than previously expected due to the delayed timing of the closure and the performance of the business over the past several months.
Separately, Scotts said it has received an $87 million dividend payment from TruGreen associated with its minority interest in the lawn service company. In 2016, ScottsMiracle-Gro contributed its Scotts LawnService business into a joint venture with TruGreen in exchange for a 30 percent interest in the combined business. To date, ScottsMiracle-Gro has received nearly $290 million in cash as a result of its ownership stake.
“The dividend we received will help fund future acquisitions and share repurchase activity associated with Project Focus,” Hagedorn said. “Although the integration efforts and cost synergies we expected from the JV remain on track, recent operational challenges at TruGreen will negatively impact our earnings another five cents per share against our previous guidance. That said, we continue to be pleased with the progress of the JV and believe our interest in TruGreen will continue to benefit our shareholders.”
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