During its December investor and analyst day, Scotts Miracle-Gro announced a definitive agreement to sell off its lawn care division (Scotts LawnService) to TruGreen for $200 million in cash and a 30 percent stake.
The merger comes on the heels of record sales for both companies. According to data presented by CFO Randy Coleman, Scotts LawnService posted record revenue of $289 million, and TruGreen grossed $1 billion. With the acquisition, TruGreen’s local network of branches and franchise locations will serve approximately 2.3 million residential and commercial customers across the United States and Canada with lawn, tree and shrub care, representing approximately $1.3 billion in revenue. Included in the deal is Action Pest Control, which was acquired by Scotts in January 2015 (see related story, below).
David Alexander, president and CEO of TruGreen, will lead the newly combined company. “This opportunity further accelerates the transformation TruGreen has experienced in the last two years achieving significant gains in revenue, customer growth and employee satisfaction,” Alexander said.
In 2011, private equity firm Clayton, Dubilier and Rice (CD&R) purchased TruGreen from ServiceMaster. Pest control and lawn care industry consultant Norman Goldenberg, a former executive with TruGreen and Terminix, told PCT that he has been impressed with how TruGreen has been operating since it split from ServiceMaster. “The morale and attitudes of the company have come up tremendously. David Alexander is a great man, and a great leader, and I think he has put together a team that is a good mix of newer people and veterans. They’ve moved on in a different direction with concentrated leadership.”
Goldenberg said he thinks that the merger will be good for employees. “I don’t know this for certain, but with Scotts concentrating on businesses other than lawn care and pest control, that moving on to the TruGreen brand may provide [Scotts employees] with some opportunities to move up there, and do bigger and better things,” he said.
As a result of the sale, CD&R will own 70 percent of the combined companies, which will operate under the TruGreen brand. Scotts will retain 30 percent ownership of TruGreen, hold two of the seven board seats and take $200 million in cash. Jim Gimeson, currently president of Scotts LawnService, will move to TruGreen as chief operating officer.
Coleman said he expects the sale to close sometime in March 2016. Scotts, which had considered acquiring TruGreen in the past, retains options to participate as a seller in a future IPO or sale to a third party, and reserves the option to purchase 100 percent of the new TruGreen.
“I can’t tell you what course we’ll take right now,” Coleman said. “The decision we make down the road will be based on what’s best for our shareholders.”
John Compton, a CD&R operating partner and former PepsiCo president, will continue to serve as TruGreen’s chairman. “We believe strongly in the commercial logic and exciting long-term growth prospects of merging these two great brands, and we expect our combined capabilities to offer a highly compelling value proposition to customers,” he said.