The Scotts Miracle-Gro Co., Marysville, Ohio, said Dec. 7 that it has received a binding offer from Israel Chemicals Ltd. (ICL), Tel Aviv, to acquire the shares and substantially all the assets of Scotts Miracle-Gro’s Global Professional business for US$270 million, subject to certain adjustments at closing, in an all-cash transaction. ICL intends to finance the purchase from its own resources.
The deal includes the brands, products, employees, and R&D resources associated with Scotts’ Global Professional business, as well as Scotts’ Global Professional facilities, including three factories and three peat mines. Key assets include the global technical sales and marketing force, which accounts for over 200 of its 340 employees, and its strong research and development capability. The business’s production plants are located in Holland, the U.K., and the U.S., and its peat mines are located in the U.K.
The U.S. professional seed business is not included in this offer.
The unit sells specialty fertilizers, growing media, and plant protection products to commercial nurseries, greenhouses, and specialty crop growers in the Americas, Europe, the Middle East, Africa, and the Far East. Products include a broad line of proprietary controlled-release fertilizers, slow release fertilizers, water-soluble fertilizers, plant protection products, wetting agents, growing media, and grass seeds sold under well-known brand names, including Osmocote, Sierrablen, and Peters Professional.
The sale is expected to close in Scotts’ second quarter of fiscal 2011, subject to regulatory review and the satisfaction of certain conditions, including works council and employee consultation. Scotts intends to apply net proceeds of the sale toward capital investments and debt retirement.
In fiscal 2010, which ended Sept. 30, 2010, the unit had sales of $242 million, which accounted for 8 percent of the company’s total sales. The purchase price is based on pro forma fiscal 2010 EBITDA of $31.4 million, a non-GAAP measure that includes certain adjustments to better reflect the economic earnings of the business on a stand-alone basis.
Scotts said back in August that it was mulling the sale of the Global Professional unit (GM Aug. 16, 2010). Operating income for the unit was off 35 percent, to $12.1 million for the year ending Sept. 30, 2010.
For fiscal 2011, Scotts anticipates the proposed transaction will be dilutive to its earnings per share in the range of 10 to 15 cents. The estimated 2011 diluted earnings per share impact excludes an anticipated net after-tax gain on the sale and direct costs associated with the transaction. Scotts estimates income taxes to be paid on the transaction will be in the range of $30 to $40 million.
“Today’s announcement is another step in our strategy to become a more focused consumer business,” said Jim Hagedorn, Scotts chairman and CEO. “Over the past two years, we have evolved our business portfolio to better leverage growth opportunities within our Global Consumer segment, allowing us to better drive shareholder value.
“While we are proud of the efforts that our Global Professional team has put forward over the years, we believe their ability to continue driving growth will be enhanced by being part of ICL, which has articulated a clear vision to invest in this business and support its growth.
“We are pleased to find a buyer that values Global Professional’s market leadership position, talented people, respected brands, and positive customer relationships,” continued Hagedorn. “ICL has extensive experience in global markets, is a leader in the global fertilizer industry, and is committed to achieving business success. These attributes give us confidence that Global Professional will be a good fit with ICL.”
“ICL’s interest in Scotts’ Global Professional business, a well-known brand in specialty fertilizers, derives from our intention to increase our focus on environmentally-important fields whose growth is being accelerated by global trends,” said Yossi Shahar, ICL’s executive vice president, corporate development. “This acquisition will establish ICL as the leading player in certain specialty fertilizers and specialty inputs markets in which we have been active for many years. Scotts’ Global Professional business is an excellent complement to our existing specialty fertilizers capabilities that will give us a broader portfolio of branded, environmentally-friendly products, an international platform for growth, stronger R&D capabilities, and significant additional marketing expertise.”
“We believe that the significant advantages the acquisition of Scotts’ Global Professional will provide us, together with the synergies that we expect to achieve and our existing global platform, will enable us to accelerate the growth and profitability of our Specialty Fertilizers business unit, and to establish the combined company as a ~$500 million specialty fertilizers and horticultural/turf inputs powerhouse,” added Yossi Zidon, ICL Specialty Fertilizers senior vice president.
Both companies said they would have teams in place to ensure a smooth transition for associates, customers, and suppliers. “We believe this proposed transaction will be positive for all of Global Professional’s stakeholders, and we are dedicated to supporting the seamless transfer of the business to ICL,” said Hagedorn.
J.P. Morgan Securities Inc. acted as Scotts’ exclusive financial advisor on this transaction, while Citi is acting as financial advisor to ICL.
Scotts, with $3.14 in worldwide sales, is the world’s largest marketer of branded consumer products for lawn and garden care.
ICL is the sixth largest potash producer in the world, and is a leading supplier of fertilizers in Europe and a major player in specialty fertilizer market segments worldwide. ICL also produces a third of the world’s bromine, is one of the world’s leading providers of pure phosphoric acid, and is a vertically integrated provider of specialty phosphates. The company’s manufacturing plants are located in Europe, the U.S., South America, China, and Israel, and its marketing and logistics networks cover the globe. ICL employs approximately 10,000 people, and its 2009 revenues were approximately $4.5 billion. ICL’s shares are traded on the TASE Exchange under the symbol ICL.
