The Scotts Miracle-Gro Company 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 industry’s 5.1% rise.
Zacks Rank & Other Key Picks
Scotts Miracle-Gro currently carries a Zacks Rank #2 (Buy).
A few other top-ranked stocks in the basic materials space are Kirkland Lake Gold Ltd. KL, Ingevity Corporation NGVT and Materion Corporation MTRN, all currently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Kirkland has an expected earnings growth rate of 8.8% for 2019. The company’s shares have surged 114.9% in the past year.
Ingevity has an expected earnings growth rate of 17.9% for the current year. The company’s shares have rallied 37.3% in a year’s time.
Materion has an expected earnings growth rate of 12.6% for 2019. Its shares have gained 5.4% in a year’s time.
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