“This is an important and transformational moment for Hawthorne, for Sunlight and for hydroponic retailers and vendors everywhere,” said Jim Hagedorn, chairman and chief executive of ScottsMiracle-Gro. “This combination reinforces our confidence in the future of hydroponic growing and creates unique competitive advantages for Hawthorne that we believe will take the industry to a new level.”
In fiscal 2018, the transaction is expected to be dilutive by $0.30 to $0.40 per share on a non-GAAP adjusted basis. The majority of the dilution is attributable to non-cash purchase accounting adjustments with the balance largely due to estimated deal costs, and increased interest expense.
The company also announced it has formally launched ‘Project Catalyst,’ which it expects will achieve $35 million in annual synergies for Hawthorne by the end of calendar 2019. Benefits from the transaction are expected to improve year-over-year non-GAAP adjusted earnings by $0.60 to $0.80 per share in fiscal 2019.
“We will move with both focus and urgency to achieve the synergies we have outlined and strengthen Hawthorne’s financial performance,” said Randy Coleman, chief financial officer. “We remain bullish on the long-term prospects for the hydroponic growing industry and Hawthorne’s strengthened leadership position, but we also know we must deliver improved results as a result of the capital that has been dedicated to this effort. I am confident Project Catalyst will help us achieve our operating margin goal of 17 to 18 percent for this business while also positioning Hawthorne to adapt to the opportunities in the hydroponics industry.”
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ScottsMiracle-Gro