ScottsMiracle-Gro Poised to Advance Cannabis Strategy in New York, Florida and other states

Rhea-AI Summary

ScottsMiracle-Gro (NYSE: SMG) has announced its support for the merger between RIV Capital and Cansortium, aiming to enhance its stake in the cannabis market in high-growth states like New York and Florida. This move aligns with ScottsMiracle-Gro's 2021 strategy, having invested $175 million in RIV Capital. The merger will see The Hawthorne Collective, a subsidiary of ScottsMiracle-Gro, exchange its RIV notes for non-voting exchangeable shares in Cansortium. This strategic combination is expected to bolster cannabis cultivation and retail operations, providing significant value-creation opportunities. RIV Capital has already made strides in New York's cannabis market, while Cansortium has established a strong presence in Florida, Texas, Pennsylvania, and Alabama.

Positive

• ScottsMiracle-Gro supports the merger between RIV Capital and Cansortium, enhancing its cannabis investment strategy.
• RIV Capital has built successful cannabis cultivation operations and a flagship dispensary in New York.
• The merger is expected to accelerate expansion in New York and fund growth in Florida.
• Cansortium holds licenses in key states: Florida, Texas, Pennsylvania, and Alabama.
• ScottsMiracle-Gro invested $175 million in RIV Capital, showing strong financial commitment.
• The combined entity aims to aggressively pursue M&A for geographic expansion and brand portfolio development.
• ScottsMiracle-Gro's subsidiary, The Hawthorne Collective, will hold non-voting exchangeable shares of Cansortium, potentially convertible into common shares.

Negative

• Delays in the implementation of adult-use cannabis in New York have been a setback.
• The upcoming merger is still subject to regulatory and shareholder approval, introducing uncertainty.
• ScottsMiracle-Gro's investment in RIV Capital is in unsecured convertible notes, presenting potential risk.

Insights

Financial Analyst

ScottsMiracle-Gro's announcement regarding its support for the combination of RIV Capital and Cansortium is a significant strategic move. By enabling RIV Capital to merge with Cansortium, ScottsMiracle-Gro seeks to create a more robust presence in key cannabis markets like New York and Florida. This move aligns with the ongoing trend of consolidation within the cannabis industry, where financial stability and scalable operations are critical for long-term success.

For $175 million invested through unsecured convertible notes, ScottsMiracle-Gro now stands to gain non-voting exchangeable shares in Cansortium. This financial maneuver provides flexibility while mitigating immediate risks. The conversion option into common shares later gives ScottsMiracle-Gro the potential to capitalize on future equity appreciation, provided the merged entity performs well.

Shareholder value creation is a key consideration here. By supporting this merger, ScottsMiracle-Gro is positioning itself to benefit from Cansortium's established operations in Florida and other states. Given the pending adult-use legalization in Florida and the incremental growth in New York's cannabis market, the combined entity's enhanced financial and operational capabilities could yield substantial returns.

Market Research Analyst

The cannabis market, particularly in the U.S., is one of the fastest-growing sectors. The merger between RIV Capital and Cansortium, supported by ScottsMiracle-Gro, underscores the strategic importance of having a strong foothold in states with burgeoning cannabis markets. New York and Florida, for instance, are anticipated to be highly lucrative due to their large populations and evolving regulatory landscapes.

For retail investors, this combination could mean increased market penetration and brand recognition for ScottsMiracle-Gro's subsidiary, The Hawthorne Collective. A stronger presence in these states allows leveraging Cansortium's sophisticated operating model and RIV's financial position to drive growth. Additionally, the combined entity's focus on M&A for geographic expansion hints at future growth opportunities, which is always attractive for investors looking for long-term gains.

The move also reflects the broader trend of established companies like ScottsMiracle-Gro entering the cannabis industry through strategic investments. This is a bet on sustained market growth, with the potential for high returns as the market matures and more states legalize cannabis.

ScottsMiracle-Gro Poised to Advance Cannabis Strategy in New York, Florida and other states

MARYSVILLE, Ohio, May 30, 2024 (GLOBE NEWSWIRE) -- The Scotts Miracle-Gro Company (NYSE: SMG) announced its support for the planned combination of RIV Capital and Cansortium, stating the move will enhance its strategic stake in cannabis cultivation and retail operations in important high-growth states.

“The combination of these two companies is a transformative step in the strategy we initiated in 2021 when we first invested in RIV Capital,” said Jim Hagedorn, chairman, CEO and president of ScottsMiracle-Gro. “Despite delays with adult-use implementation in New York, RIV Capital has become a legitimate player in the state’s medical and recreational cannabis market. Cansortium, meanwhile, is a proven operator with licenses in Florida, Texas, Pennsylvania and Alabama. Together, they will have the financial means and strong operating team to expand in four of the five most populous states, leading to value-creation opportunities for RIV and Cansortium shareholders as well as our ScottsMiracle-Gro investment.”

RIV Capital (CSE: RIV) (OTC: CNPOF) and Cansortium (CSE: TIUM.U) (OTCQB: CNTMF) announced today that they have agreed to combine and move forward as Cansortium. Through its subsidiary, The Hawthorne Collective, ScottsMiracle-Gro previously invested $175 million in unsecured convertible notes in RIV Capital. Upon approval of the RIV Capital and Cansortium deal by regulators and shareholders later this year, The Hawthorne Collective will exchange the RIV notes for non-voting exchangeable shares of Cansortium. These shares can be converted into common shares of Cansortium at The Hawthorne Collective’s discretion.

As the largest investor in RIV, ScottsMiracle-Gro sought to provide RIV with a strong balance sheet to secure a New York state license and gain a foothold in the existing medical market while capitalizing on legalization of adult use.

“We’re pleased with RIV’s accomplishments in New York, as it has built out cultivation operations and opened a flagship White Plains dispensary that is exceeding expectations,” said Chris Hagedorn, president of The Hawthorne Collective and division president at ScottsMiracle-Gro.

“Cansortium’s sophisticated operating model can accelerate expansion in New York, while RIV’s cash position can fund growth in Florida, where adult use is on the November ballot. Longer term, we expect the combined Cansortium business to aggressively pursue M&A aimed at geographic expansion and the creation of a portfolio that includes the best cannabis brands with the highest consumer demand.”

About ScottsMiracle-Gro
With approximately $3.6 billion in sales, the Company is the world’s largest marketer of branded consumer products for lawn and garden care. The Company’s brands are among the most recognized in the industry. The Company’s Scotts®, Miracle-Gro®, and Ortho® brands are market-leading in their categories. The Company’s wholly-owned subsidiary, The Hawthorne Gardening Company, is a leading provider of nutrients, lighting and other materials used in the indoor and hydroponic growing segment. For additional information, visit us at www.scottsmiraclegro.com.

For investor inquiries:
Aimee DeLuca
Sr. Vice President
Investor Relations
aimee.deluca@scotts.com
(937) 578-5621

For media inquiries:
Tom Matthews
Chief Communications Officer
tom.matthews@scotts.com
(937) 644-7044

FAQ

What is the significance of the ScottsMiracle-Gro support for the RIV Capital and Cansortium merger?

ScottsMiracle-Gro's support for the merger aims to enhance its strategic stake in the cannabis market in high-growth states like New York and Florida.

Why is ScottsMiracle-Gro interested in the cannabis market?

ScottsMiracle-Gro sees significant value-creation opportunities in the cannabis market, particularly in high-growth states and through strategic mergers and acquisitions.

What states are RIV Capital and Cansortium operating in?

RIV Capital operates in New York, and Cansortium has licenses in Florida, Texas, Pennsylvania, and Alabama.

How much did ScottsMiracle-Gro invest in RIV Capital?

ScottsMiracle-Gro invested $175 million in RIV Capital through its subsidiary, The Hawthorne Collective.

What are the next steps for the RIV Capital and Cansortium merger?

The merger is subject to regulatory and shareholder approval, expected to finalize later this year.