ScottsMiracle-Gro Invests $150M into Canadian Cannabis Firm

ScottsMiracle-Gro delves into the world of cannabis!

Last week, the group announced its cannabis investment entity, and an investment worth $150 million in RIV Capital.

The RIV Capital firm is listed on the Toronto Stock Exchange.

Does this mean the company is now interested in growing its balance sheet like weed?...

The company stated in its announcement that the investment entity was purchased purposely for cannabis.

The Scotts Miracle-Gro Company

This company is well known in the consumer lawn and garden products industry. The company produces and sells fertilizers, plant foods, grass seed, pest control chemicals, gardening soils, and other useful gardening products in countries across Europe and North America.

It also offers a wide range of products for novice and professional horticulturists.

The company is prominent for its lawn services in the United States of America.

The most prominent and endearing characteristic of the Scotts Miracle-Gro franchise is that the professionals in this company know how to make plants grow and they do it effortlessly.

Hawthorne Collective: Newest subsidiary of the Scotts Miracle-Gro company

The investment entity has been named "The Hawthorne Collective". The entity will be used to go after minority investments with companies that are not being sought after by Scotts Miracle-Gro's gardening company—known as The Hawthorne Gardening Company.

This gardening subsidiary owns and runs many cannabis-focused gardening brands. It also manufactures and supplies hydroponics and other supplies needed by the cannabis cultivation sector.

Using the Hawthorne Collective, Scott's Miracle-Gro has positioned itself as a new participant in the growing world of the marijuana industry. It is also working hard to ensure that the Hawthorne Gardening Company houses the most important gardening brands.

I must point out that the group is currently housing most of the dominant gardening brands in Toronto. When you talk about working hard, smart and fast; Scotts Miracle-Gro seems to be doing all.

Considering the amount of money already invested into the industry, the company has no other choice but to succeed.

Delving Into The Cannabis Industry With Riv Capital

The group's first investment was done by issuing a $150 million convertible loan to RIV capital, a cannabis investment, and acquisition firm based in Toronto, Canada.

RIV Capital was previously one of the subsidiary groups of the cannabis dominant company known as Canopy Growth.

In the statement released by the company to the press, it is stated that there is an accruing interest rate fixed at 2.03%. It also states that when the deal is finally closed, RIV capital will emerge as the Hawthorne Collective groups' preferred vehicle for whatever investment may surface in the future.

The hefty sum of $150 million invested into the RIV Capital firm has increased its available capital to $319 million, using the current exchange rates.

According to the President and CEO of RIV Capitals, Narbé Alexandrian, the investment has opened countless doors of valuable opportunities for the firm. These opportunities will be utilized to further boost the growth and value creation of the firm.

RIV's board of directors will subsequently be increased to seven. This is to create space for the incoming three members that will be nominated by the Hawthorne Collective. They have the right to do so.

The contract signed by both parties states that Hawthorne Collective will not have any active day-to-day role in RIV. It is said that this item will be stated in the contracts the collective signs with any of the other companies it will be investing in in the future.

Why Invest in RIV?

The US federal law classifies cannabis as a schedule 1 drug, so it is prohibited.

Scotts Miracle-Gro cannot be involved with any cannabis-related product due to its connections with the New York Stock Exchange.

Doing so might ruin their legacy business of agricultural products and equipment.

This is why they chose RIV capital to do what the Scotts cannot delve into on their own.

RIV capital will be used to secure ties with businesses relating to cannabis in the US. According to Alexandrian, the $150 million investment can be used as collateral to secure more funds.

Words from the Chairman

The chairman and CEO of the Scotts Miracle-Gro franchise, Jim Hagedorn said the growth of the Hawthorne Gardening Company over the past six years has helped the company boost its shareholder value. More shareholder value has been generated due to the profitable endeavors carried out by the gardening subsidiary.

He also said in a released statement that, “It has also allowed us to develop a rare level of expertise and insight regarding the cannabis space without being involved in the plant-touching aspects of the industry."

With the significant profit made, the company's board believes it's about time the company invested in other profitable areas of the cannabis industry.

The Hawthorne collective will be used as a strategy to win over powerful cannabis companies/brands that will then be merged with the Hawthorne Gardening Business.

The loan issued to RIV Capital company is a six-years note that includes investment rights. The 2.03% interest will accrue for the first two years of this agreement.

In the event of note conversion, the Scotts Miracle-Gro company will be entitled to 42% of RIV Capital, though it will be owned through the Hawthorne Collective groups.

Chairman Jim also added that the establishment of Hawthorne Collective was done to allow the company to investigate/ properly scrutinize the opportunities in the budding marijuana industry. The marijuana market is booming in sales and the number of customers increases daily. In the coming months, the marijuana industry will be better positioned for more significant growth.

Bottom Line

With Scotts Miracle-Gro's reputation, track record, experience, and brand awareness, it would not be long before the group leverages RIV's Insights to improve their acquisition and investment strategies in the countries they operate in.

As expressed by the Chairman and CEO, Jim Hagedorn, the Hawthorne collective will enable Scotts Miracle-Gro a stake in the cannabis industry, and as soon as the legal stance of the United States changes nationwide, the group will be able to ultimately enter the US cannabis industry.

It all points down to the endgame; a deeper dive into the US cannabis scene.