Scotts Miracle-Gro (SMG) Divests 30% Ownership In TruGreen
Zacks Investment Research | Mar 24, 2019 09:07PM ET
The Scotts Miracle-Gro Company (NYSE:SMG) recently announced that it has sold around 30% interest in TruGreen to the majority owner for roughly $234 million.
Additionally, Scotts Miracle-Gro has received cash proceeds worth $18.4 million related to the assignment to a third party of debt of the JV. The total proceeds of around $120-$140 million (after-tax basis) will be applied to reduce the company’s debt. As such, the company expects the proceeds to lower debt-to-EBITDA ratio below 4 by the end of fiscal 2019.
In 2016, Scotts Miracle-Gro’s fully-owned subsidiary — Scotts LawnService — entered into a joint venture (JV) deal with TruGreen. Private equity firm Clayton Dublier & Rice and TruGreen, as the co-investors, owned 70% of the JV while the rest was owned by Scotts Miracle-Gro.
Post formation of the JV, Scotts Miracle-Gro received roughly $200 million tax deferred dividend. The company received another tax-deferred dividend of around $90 million in 2017. Per the company, these payments were equal to the initial valuation placed on Scotts LawnService at the time of the establishment of the JV. The company believes that the shareholder value was maximized by the formation and divestiture of this JV.
Shares of Scotts Miracle-Gro have lost 11.1% in the past year, against the Zacks Investment Research
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