Scotts Buys Smith & Hawken

On Aug. 9, Marysville, OH-based lawn care products manufacturer Scotts purchased $145 million Novato, CA-based Smith & Hawken, a cataloger/retailer of upscale garden products, from private equity firm DDJ Capital Management. In addition to paying $72 million for Smith & Hawken, the $1.9 billion Scotts will assume $14 million in debt. The deal is expected to close Oct. 1.

According to Michele Farabaugh, Smith & Hawken’s senior vice president of marketing, the deal will help both companies broaden their core product niches. For Scotts, it provides an opportunity to expand beyond staples such as pesticides and lawn seeds to more-discretionary products favored by affluent consumers.

Scotts plans to sell Smith & Hawken garden tools, teak furniture, and ornaments to big-box retailers such as Home Depot and Lowe’s. Such a marketing strategy expands on Smith & Hawken’s move earlier this year, when the company tested the “store within a store” concept at select independent garden centers, such as the Digs chain in the South. The wholesaling venture is “another area of growth for us,” Farabaugh says.

With Scotts serving as a wholesale distributor, “Smith & Hawken will now get a far wider access to the retail market,” says Deborah Douglas, a principal with St. Louis-based investment bank Douglas Group. “It’s something that Smith & Hawken couldn’t get previously” with its 56 stores in the U.S.

It’s interesting that a mass-market producer such as Scotts wants an entree into the catalog market, Douglas adds: “That’s a good sign for everybody — it means that the market is widening.” Douglas estimates that Scotts paid about six times earnings for Smith & Hawken, which is “about the market for stronger catalog companies these days.”

Smith & Hawken was founded in 1979 by Dave Smith and Paul Hawken, who sold the company in 1993 to CML Group. In February 1999, CML sold Smith & Hawken to Wellesley, MA-based investment firm DDJ Capital and the Madison-based State of Wisconsin Investment Board.