Scotts Signs Agreement to Acquire Smith & Hawken
The Scotts Company announced last week it is planning to acquire Smith & Hawken, Ltd., one of the nation’s leading brands in the fast-growing garden lifestyle category.
According to Michelle Farabaugh, senior vice-president of marketing at Smith & Hawkin, The Scotts Company approached DDJ Capital Management, which privately owns Smith & Hawken through funds managed by the investment boutique, several months ago about the possible acquisition of the name brand gardening tool company. Farabaugh said that Scotts wants to be associated with the best brands in the industry; they want to own the best brands in the industry as well. Scotts could not be reached for comments.
As for the Smith & Hawken end of the deal, Farabaugh said that the company is very excited about the new agreement because it will give the company access to a number of aspects of the industry that it did not have before, and that it will help lift the brand even more.
“The Smith & Hawken brand is the gold standard in outdoor living and is an outstanding fit with our strategy to extend our reach into adjacent lawn and garden categories and to own industry-leading brands in every category in which we compete,” said Jim Hagedorn, chairman and CEO of Scotts in a recent press release. “Avid gardeners know and trust the Smith & Hawken brand just as they do Scotts, Miracle-Gro, Ortho and Roundup. The power and flexibility of the Smith & Hawken brand are the driving forces in pursuing this opportunity.
“This acquisition is a natural step for Scotts,” Hagedorn continued. “Gardening today is about much more than tending to your flowers and maintaining a beautiful lawn — it's about a lifestyle. Our consumers are incorporating gardening themes into their everyday lives, both indoors and outdoors. The Smith & Hawken brand will further strengthen our relationship with consumers and create exciting and new opportunities for growth.”
Also according to Farabaugh, as of right now, Smith & Hawkin will continue business as usual, and that includes all of its branding programs. She said that currently there will not be co-branding on any of the Smith & Hawken promotional material with the Scotts name; the company will still retain just the Smith & Hawken name. However, the definitive agreement was only signed about one week ago, and many details still remain up in the air; the final documents will not be signed until October 1. Again, Scotts could not be reached for comment.
Smith & Hawken products are sold through its 56 retail stores around the United States as well as through catalog and Internet sales. The company has also extended its brand into other retail channels with its successful store-within-a-store concept in garden centers across the country. “Growth through additional channels of distribution will be key to our strategy as we look to bring this premium brand to even more consumers in more places,” Hagedorn said.
“We're excited to join an organization that shares our passion for gardening and high-quality products,” said Barry Gilbert, CEO of Smith & Hawken. “Our team has done an excellent job building the Smith & Hawken brand, but we have only scratched the surface. We look forward to working within the Scotts family and doing everything we can to enable our brand to reach its full potential.”
Scotts will pay approximately $72 million for Smith & Hawken, including the assumption of $14 million of existing debt. It will fund the transaction, which is scheduled to close Oct. 1, with its existing credit facility. Smith & Hawken is projected to report 2004 revenue of about $145 million, and the transaction is expected to be slightly dilative in fiscal 2005. Banc of America Securities LLC will serve as financial advisor to The Scotts Company in connection with the transaction.
Smith & Hawken employs approximately 850 people and will continue to be based in Novato, Calif. It was founded as a high-quality garden tool company in 1979 by Dave Smith and Paul Hawken and has successfully grown by extending its product line and focusing on serving consumers of high-end gardening lifestyle products.
Upon completion of the deal, Gilbert, who has led the company since 2001 and was previously vice chairman and COO of The Sharper Image, will continue to lead the Smith & Hawken business. The rest of the Smith & Hawken management team also will be retained.
“Barry and his team have done an outstanding job building a successful organization and have created an entrepreneurial culture that is very much like that of Scotts,” Hagedorn said. “We look forward to working with them and our existing retail partners and believe that, together, we can leverage the power of the Smith & Hawken brand even further, creating new growth opportunities for the lawn and garden industry.”