NEW YORK – During its investor and analyst day, Scotts Miracle-Gro announced a definitive agreement to sell off its lawn care division to TruGreen for $200 million in cash and a 30 percent stake.
The acquisition 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 acquisiton, TruGreen’s local network of branches and franchise locations will serve approximately 2.3 million residential and commercial customers across the U.S. and Canada with lawn, tree and shrub care, representing approximately $1.3 billion in revenue. TruGreen president and CEO David Alexander will lead the new 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.
Clayton, Dublier and Rice, the private equity company that purchased TruGreen from ServiceMaster in 2011, will own 70 percent of the combined companies, which will operate under the TruGreen brand. As a result of the sale, Scotts will own 30 percent of TruGreen, hold two of the seven board seats and take $200 million in cash. Jim Gimeson, currently president of Scotts LawnSerivce, 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,” Compton said
Since Alexander became president and CEO of TruGreen, he has been very active in mergers and acquisitions, compared to the company’s activity before he was hired. He has overseen seven mergers or acquisitions, not including this one, since taking over the role in 2012.
In September, the company made its biggest acquisition at the time when it acquired Noon Brothers, an $8-million company based in Boston.
The company announced in November it will offer a lawn sprinkler maintenance service in 15 to 20 markets in 2016. The service will extend throughout the nation next year, Vice President Brent Armstrong said. The service has been active this year in eight cities as a pilot program.
These moves back up what Alexander told Lawn & Landscape when we spoke with him earlier in the year and he described TruGreen’s future approach to acquisitions as “historic."
"If you go back two or three years, and you look at how TruGreen was acquiring, that’s kind of what we want to do now. We want to invest – it’s not a small number, it’s in the millions," he said. "So, we want to invest in acquisitions and this is the year we’ll start back. We have a half dozen or so in the pipeline that we’re seriously considering. We’ll put some more in soon that we’re beginning to consider, so it is something we’re getting back into."
A $1-million permit was also filed in September to renovate the new TruGreen headquarters in East Memphis, Tennessee.
Brian Horn contributed to this article.
What’s Next for Action Pest Control?
In January, Scotts LawnService, a business unit of the Scotts Miracle-Gro Co., announced that it had closed the acquisition of Action Pest Control for $22.7 million.
Under the direction of President Kevin Pass, Action had grown into a large regional pest control company with seven offices, 125 employees and annual revenues of $12.6 million. In a Scotts press release distributed following the deal’s closing, Jim Gimeson, president of Scotts LawnService, said, “We are excited to complete the acquisition of Action Pest and see it as an important step forward in executing our long-term growth strategy.”
The press release also stated that, “Given the fragmented nature of the $7 billion home pest control category, Scotts believes it can complement organic growth in lawn service by consistently expanding its pest control platform.”
Those plans for Action Pest Control to act as a platform for expansion never materialized. Soon after the Action deal closed, Scotts changed course on its pest control plans, and in a February 2016 earnings call, Scotts CEO Jim Hagedorn said the company wanted to focus on other growth initiatives that aren't as costly like indoor and urban gardening, in addition to its core businesses.
What will the TruGreen-Scotts merger mean for Action? Industry consultant Norman Goldenberg, a former executive with TruGreen and Terminix, thinks TruGreen would do a fine job running Action as a separate operation. “I don’t know if TruGreen really wants to devote its energies there, but [Action] is a successful business so I don’t know why they wouldn’t,” he said.
A TruGreen spokesperson e-mailed PCT, "As with all aspects of this transaction, we are evaluating to see where it fits with the combined TruGreen and SLS brands going forward." — Brad Harbison