Chris Hagedorn, general manager of Scotts Miracle-Gro's Hawthorne Gardening Co., visits the AeroGrow International facility in Boulder on Aug. 15, 2016. AeroGrow manufactures indoor garden systems and Hagedorn now is the company's chairman following Scotts' ownership increase in the Boulder firm. (Joe Amon, The Denver Post)

Scotts Miracle-Gro charges ahead in hydroponics, takes control of Boulder’s AeroGrow

Scotts Miracle-Gro is now the majority owner of Boulder’s AeroGrow International Inc., the indoor gardening products company that was Scotts’ first foray into hydroponics.

AeroGrow this week announced that Scotts subsidiary SMG Growing Media Inc. upped its ownership stake in the Boulder firm to 80 percent after it exercised the entirety of its outstanding warrants to acquire AeroGrow common stock. Scotts, which previously held a 45 percent ownership stake, disclosed the ownership increase possibility earlier this year.

The exercise of 21.6 million shares resulted in a $47.8 million infusion for AeroGrow, of which $41 million will be distributed to shareholders and $6.8 million will pay off the working capital loan from Scotts, officials said.

Scotts, via its Hawthorne Gardening Co. division, has been making big plays in the hydroponics industry by spending nearly a half-billion dollars buying up sector-leaders such as General Hydroponics, Gavita and Botanicare. Those moves, which started with a $4.5 million investment in AeroGrow in 2013, give Scotts a foothold in the ancillary side of the legal cannabis industry, its executives have said.

With the warrant exercise, Scotts also gains greater control of AeroGrow’s board of directors.

Existing board member Chris Hagedorn, who heads Hawthorne, will assume the role of chairman. Peter Supron, chief of staff to Scotts’ president, and Albert Messina, finance and strategy lead at Hawthorne, also will join the board.

AeroGrow CEO J. Michael Wolfe and director Michael Barish resigned from the board. Jack Walker stepped down as chairman and assumed an independent director role.

Wolfe, who will remain president and CEO of AeroGrow, said in a statement that Scotts’ investment has been “transformational” for the small company:

“The capital generated by the warrant exercise allows us to be instantly debt-free and provides the working capital to fund our anticipated growth for the foreseeable future. We’ll use that capital to accelerate the development of several exciting new products, further expand existing distribution channels, open significant new markets in North America and in other international markets, and fund increased advertising media to generate product, brand and category awareness. In addition, shareholders will receive a very attractive distribution.”

AeroGrow officials were not immediately available for comment. In interviews earlier this year with The Cannabist, Wolfe and Hagedorn addressed the potential future for AeroGrow in both indoor gardening and legal cannabis:

If AeroGrow were to start catering to growers of the “high-value crop” of marijuana, it would take some tweaks of the AeroGarden’s technology, Hagedorn said. AeroGrow’s Wolfe, when addressing this topic, said that his company is developing larger AeroGardens that can produce bigger harvests.

“Our mission is to make the world’s best smart indoor gardens,” Wolfe wrote. “We’re in development of several new products designed to grow bigger crops and harvests than ever. We’ll leave it to our customers what they might want to grow with this new generation of AeroGardens.”

In a long-term view, Hagedorn said he’s excited about the potential that these hydroponic systems could have in providing sustenance in places where the local food supply is unreliable or the land isn’t suitable for growing food.