Twenty months ago, Boulder-based AeroGrow International Inc. was teetering financially.
A rough couple years — which included a retail scale-back and layoffs — resulted in a lack of liquidity that triggered a “going concern” qualification from the company’s independent auditor, which indicated the maker of indoor gardens’ future was at risk.
That future outlook has taken a 180-degree turn, company officials said Tuesday after announcing that they inked an agreement with The Scotts Miracle-Gro Co. (NYSE: SMG).
The Marysville, Ohio-based lawn and garden company acquired a minority stake in AeroGrow (OTCBB: AERO) after investing $4.5 million in the local manufacturer of indoor gardens and accessories, company officials announced.
Under the transaction — which included a $4 million investment and a $500,000 asset purchase — Scotts Miracle-Gro subsidiary SMG Growing Media Inc. gained a 27 percent stake in AeroGrow with options to increase its holding. Those options start in three years and continue for an eight-year period, AeroGrow officials said.
AeroGrow’s 20-person office in Boulder will remain and be unaffected by the deal, said Mike Wolfe, AeroGrow’s chief executive officer.
“The new allegiance … affords us the opportunity to invest pretty heavily in new technologies and new products we want to bring to market,” Wolfe said.
That market should grow in both direct-to-consumer and retail areas nationally and overseas, he added.
The agreement allows for AeroGrow to have access to Scotts Miracle-Gro database of customer e-mail and land addresses, Wolfe said. Additionally, there may be opportunities to leverage the existing relationships with retailers such as The Home Depot, Lowe’s and Costco, he added.
“(Scotts Miracle-Gro’s businesses) are among the largest vendors at some very large retailers,” Wolfe said.
AeroGrow’s AeroGarden product will be rebranded as the Miracle-Gro AeroGarden and the firm is expected to receive additional support in areas such as marketing, distribution and research and development, officials said.
A Scotts affiliate acquired AeroGrow’s intellectual property as part of the agreement.
In return, AeroGrow receives a perpetual exclusive license to use that technology and also will receive royalties on worldwide use of that technology, Wolfe said.
Officials for Scotts Miracle-Gro could not be reached for comment on the transaction.
In a statement, Scotts Miracle-Gro’s executives said they plan to bolster the AeroGarden products.
“We see long-term opportunity in using AeroGrow’s technology to grow the indoor gardening category, as well as in expanding the ‘seed pod’ technology outdoors,” Jim Gimeson, senior vice president and general manager of gardens at Scotts Miracle-Gro, said in a statement.
“In addition, we see an opportunity for these products to perform well in international markets where indoor plants are very popular with consumers.”
Shares of AeroGrow jumped 60 cents, or 46.15 percent, to close at $1.90 on Tuesday.
Contact Camera Business Writer Alicia Wallace at 303-473-1332 or wallacea@dailycamera.com.
