Hydrofarm Holdings Group, Inc. (“Hydrofarm” or the “Company”) (Nasdaq: HYFM), a leading distributor and manufacturer of hydroponics equipment and supplies for controlled environment agriculture (“CEA”), today announced that it has signed a definitive agreement and closed on the acquisition of Canadian nutrient company, Greenstar Plant Products, Inc. (“Greenstar”), manufacturer of the Grotek and Gaia Green brands. These brands join Hydrofarm’s lineup of high performance, proprietary branded products in the lighting, climate control, nutrients and growing media categories.
Hydrofarm funded the purchase price of approximately $83 million U.S. dollars ($103,635,000 Canadian dollars) using a combination of cash and the Company’s existing credit facility, and under the terms of the transaction agreement, Greenstar will become a wholly owned indirect subsidiary of Hydrofarm Holdings Group, Inc.
Greenstar is the latest in a succession of plant nutrient manufacturers to be acquired by Hydrofarm in 2021. Last month, Hydrofarm acquired Oregon-based organic hydroponic products manufacturer and supplier Aurora Innovations, Inc., Aurora International, Inc. in Canada, and Gotham Properties LLC (“Aurora”). The acquisition continues Hydrofarm’s strategic efforts to acquire manufacturers of branded products in key CEA product categories, including the aforementioned Aurora, as well as nutrient brands HEAVY 16, House & Garden and Mad Farmer.
“With a long relationship that has grown organically over the years, the addition of Greenstar to the Hydrofarm family feels like a natural next step in our efforts to broaden our company’s footprint and strengthen our product portfolio,” said Bill Toler, Chairman and Chief Executive Officer of Hydrofarm.
“We’re excited about the many opportunities becoming a part of Hydrofarm will create and to play a role in the company’s growth,” said Michael Nemirow, CEO of Greenstar Plant Products, Inc. “Over the years, we’ve established a great working relationship based on a passion for the future of Controlled Environment Agriculture and the horticultural market overall, along with our shared commitment to delivering quality products and service.”
Hydrofarm expects Greenstar to generate approximately $26 million U.S. dollars in net sales in 2021, representing significant growth from the prior year. Hydrofarm has historically distributed Greenstar’s Grotek and Gaia brands, representing approximately 50% of Greenstar’s total net sales. The transaction is expected to be accretive to Hydrofarm, as the Company will now pick-up Greenstar’s manufacturing profit margin profile, in addition to the portion of Greenstar sales that it did not previously represent, as a result, the Company expects the acquisition will enhance the Company’s adjusted EBITDA margin for the 2021 fiscal year. The transaction represents an acquisition multiple of approximately 8x Greenstar’s estimated 2021 Adjusted EBITDA, excluding synergies but including the net present value of estimated tax benefits resulting from the transaction.
The Company will discuss further details of this transaction and related financial information during its second quarter 2021 earnings conference call, scheduled for August 12th, 2021.
Rothschild & Co. is serving as financial advisor, and DLA Piper is serving as legal advisor to Hydrofarm.
