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Ohio company capitalizes on legal pot industry

Scotts Miracle-Gro buying hydroponics suppliers
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Posted at 11:40 AM, Oct 12, 2016
and last updated 2016-10-12 11:40:06-04

An Ohio company has become the place to turn for investors looking to cash in on legalized marijuana, Bloomberg reports.

Marysville-based Scotts Miracle-Gro Co., which most people know for its lawn care products and plant fertilizers, has been buying up companies that provide specialty fertilizers, lighting and other supplies for hydroponics, an indoor method of growing marijuana. It's the favored way to cultivate the crop in states where it's legal.

While Scotts' hydroponics business generates $250 million a year -- less than 10 percent of the company's $2.9 billion revenue the past 12 months -- it delivers higher margins, Chief Financial Officer Thomas Randy Coleman said.

Scotts first stepped into the marijuana business last year when it bought nutrients maker General Hydroponics, Bloomberg reported. And sales have doubled expectations, Chief Executive Officer James Hagedorn said during the company’s third-quarter earnings call in August.

Another company Scotts acquired, Gavita, makes "grow lights" for hydroponics operations; Scotts paid $136 million for the company and it "can't make things fast enough" to keep up with demand, Hagedorn said.

Scotts stock hit a record $84.63 a share on Wednesday. And polling shows voters in five states -- California, Massachusetts, Maine, Nevada and Arizona -- are likely to approve ballot measures next month allowing recreational marijuana use among adults. Four other states, including Florida, vote Nov. 8 on legalizing medical pot. Ohio's legislature legalized medical marijuana last month, though regulations are still under development.

 

Those states would mean huge growth for the country's $6 billion legal marijuana business: California alone could triple the industry if its ballot measure passes.

If all five ballot measures pass, the number of adults living in states where recreational pot is legal would more than double, to 23 percent of the U.S. population, Leslie Bocskor, a Las Vegas-based managing partner at Electrum Partners LLC, told Bloomberg.

"Scotts is one of the only public companies you can play to actually participate in the growth of the industry,"” Bocskor said.

Recreational use is already allowed in Alaska, Colorado, Oregon, Washington and the District of Columbia. Medical marijuana is legal in 25 states.