You almost detect a tear in his eye as Scotts Miracle-Gro’s CEO Jim Hagedorn told investors last week: “This is a bit of a bittersweet moment for us.”
He had just announced that Scotts had received a binding offer from Exponent Private Equity of around $250 million for its non-US businesses, which includes Miracle-Gro in the UK and Europe. The deal is expected to be completed by 30 September.
They were selling good businesses, he said. “In fact, international is out-of-the-gate strong this season, which reinforces the challenge that this was not…it was not the business, it was our ownership.”
It was, he said, all about accepting that Scotts could achieve better growth and margin opportunities in its home territory, the United States, “and that's where it makes sense for us to invest. If we're not willing to invest in these other businesses, then we owe it to everyone, especially our associates, to put these businesses in the hands of a better owner.”
He believed Exponent was the right owner. “They're excited about the category, our brands, and the opportunity to grow. Since this is likely my last time to publicly do so, I want to thank and congratulate our associates in these businesses.”
This will have been welcomed by the hard-working Miracle-Gro Company team down at Frimley, who would have been forgiven had they found the recent ownership uncertainty a tad unsettling.
Jim recalled how his career in lawn and garden started in Europe when his father, Horace, sent him over to England to launch Miracle-Gro. “I know what this industry is like over there. I know that it's more complicated, more competitive, and just flat out harder than the United States. Our people in Europe and Australia have done an outstanding job and probably haven't always received the credit they deserve. I want to thank them and wish them good luck with Exponent.”
He also thanked the friends he had made over here on the retail side of the business. “I'm really going to miss you guys.”
Pass the Kleenex…
The momentary melancholy was lifted, though, when he reminded his audience that once the deal was done, the company re-configured and the cash in the bank, more than 95% of the sales and profit would be derived from the United States.
And a lot of it, he hopes, will come from the burgeoning cannabis industry, which Scotts’ Hawthorne subsidiary is busily servicing as we speak.
CFO Randy Coleman (also Executive Vice-President) said the combined impact of selling the international businesses and hitting the company’s financial targets this year would improve the operating margin by 17%.
He also confirmed Scotts would maintain the UK and German employee pension plans. “That was part of the arrangement from day one as we talked to Exponent, the buyer, and we're comfortable with that,” he added.
We asked Exponent PE's Simon Davidson (pictured right) if he would like to comment further but had not received a reply as this edition was being prepared. Sheila Hill, who runs the UK division, also declined to comment.
[Our thanks to analysts Seeking Alpha of New York for the transcript of last week's Scotts Miracle-Gro earnings call, from which this article was prepared]
Post Script: US market websites have also reported this weekend that Jim Hagadorn sold shares worth $2.93m on Wednesday 3rd May. American Banking News states he now directly owns 99,006 shares in the company, valued at $8,8m.