Scotts Miracle-Gro announces joint venture
The Scotts Miracle-Gro company has announced the formation of a joint venture between Scotts LawnService and TruGreen.
The move comes as part of a broader strategy to maximize the value of its non-core assets to focus on emerging categories in the industry.
“We are convinced that significant opportunities remain in our U.S. business in emerging areas like organic and natural products, live goods, nutrients for hydroponic gardening, the development of water positive landscapes and bringing internet-enabled technology to the garden,” said Jim Hagedorn, chairman and CEO. “In an effort called ‘Project Focus,’ we are committing to invest the human and financial resources necessary to win in each of these areas.”
“This commitment requires choices, which means we must re-evaluate the assets in our portfolio that we no longer see as core," he added. "The actions we are taking or contemplating are all designed to enhance the value of each asset we own while also giving us maximum optionality going forward.”
In the combined entity, Scotts Miracle-Gro will be 30% owner. TruGreen, which is controlled by private equity firm Clayton, Dubilier & Rice (CD&R), will be the brand the JV operates under. Additionally, a fund managed by CD&R will hold the controlling interest.
The joint venture will have approximately 2.3 million customers and approximately $1.3 billion in revenue.
The combined business will be based in Memphis, where TruGreen headquarters are located. David Alexander, TruGreen’s CEO, will lead the combined company, with Jim Gimeson, president of Scotts LawnService, serving as COO.
“We continue to believe the demographics and long-term trends remain extremely favorable related to the future of do-it-for-me lawn service,” Hagedorn said. “But as we studied our options to capture those benefits, we concluded that our customers and shareholders would be best served by combining Scotts LawnService with TruGreen. Given the complexity of the transaction, as well as the relative value of the two businesses, it was equally clear the best way to make such a combination work was for us to take a minority position."
“This combination is structured in a way that gives us maximum optionality in the future," he added. While it’s far too early to predict our future in the service industry, any decision made regarding this investment will be focused on what is in the best interest of our shareholders.”
The transaction is expected to close by the end of next year's second quarter.
Other potential news on the horizon for Scotts Miracle-Gro: the company says it expects to make a "significant investment" in the live goods industry during the next 90 days, as well as ramp up investment in businesses that market nutrients and other inputs for hydroponic and indoor gardening.