Scotts Miracle-Gro to Separate its Hawthorne Cannabis Business

The company has talked about a spin out before but said now there's more promising opportunities.

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Scotts Miracle-Gro has decided to spin out its Hawthorn cannabis business segment and turn it into a standalone company.

CEO Jim Hagedorn told investors last week that his company is focused on getting back to basics, which will include moving its cannabis investments.

"We believe 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, according to a transcript of the company's most recent earnings call.

For Scotts, the move could clarify its equity picture, bring tax benefits and credit capacity, and allow the plant-touching business to work alongside Hawthorne's management team with formal relationships to Scotts Miracle-Gro.

"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," Hagedorn said. "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. The timing is right, and we believe we can make the shift while still meeting our 2025 guidance."

Hawthorne segment sales fell 35% to $52.1 million during the previous quarter, down from $80.1 million last year. The company said the decline was expected due to Hawthorne’s strategic exit from third-party distribution as of April 1, 2024.

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