Scotts Miracle-Gro is putting some distance between it and its cannabis business segment, an investment that has cost it substantially.
CEO Jim Hagedorn spoke last week with CNBC’s Jim Cramer and said his company “burned $2 billion” on the Hawthorne Collective, its cannabis subsidiary launched in 2021.
“So...we’re going to put the business into another entity, and we’ll have equity in that. And we’ll hope for the best,” he said, adding that Hawthorne is now "mostly off the table."
Under terms of the deal, Scotts Miracle-Gro transferred The Hawthorne Collective to the strategic partner in exchange for an interest-bearing promissory note. It retains an option to reacquire The Hawthorne Collective or its assets should cannabis legalization and other measures to positively impact the industry be approved at the federal level.
The official separation comes after Hagedorn earlier this year told investors that moving Hawthorne out of Scotts Miracle-Gro is better for everyone.
“For our shareholders, this would eliminate the volatility of the cannabis sector and generate a significant uplift in gross margin," he said. "I know you've heard us talk about the separation before, and you may recall that we moved off of it last year because we couldn't find a suitable partner. The difference today is there are more promising opportunities. Hawthorne is now in a position of strength after the hard work to return it to profitability."
