Trading Symbol: The Toronto Stock Exchange - GRO.UN
VANCOUVER, Oct. 1 /CNW/ - Sun Gro Horticulture Income Fund (the Fund) today announced that it, together with its wholly owned subsidiary, Sun Gro Holdings, Inc., will acquire all of the outstanding shares of Grow Best Holdings, LLC for US$20.3 million. Grow Best Holdings owns Florida Potting Soils, Inc. and Sunshine Peat, Inc., both based in Orlando, Florida. In addition to the outstanding shares, Sun Gro Holdings will purchase real estate and equipment used in the business for US$2.1 million. The transaction is expected to close later today and will be funded through the issuance of US$2 million of trust units of the Fund and borrowings of US$20.4 million under a new acquisition line of credit.
Florida Potting Soils primarily sells bulk bark growing mixes to nurseries in Florida and neighbouring states, and also produces and sells custom sand and peat-based blends for golf course construction and maintenance. It is the largest producer of professional mixes in Florida. Sunshine Peat harvests "muck" peat from a central Florida bog and supplies it to Florida Potting Soils for use as a raw material in custom mixes. This grade of peat does not have the same air and water retention characteristics as Canadian sphagnum peat but, in mixes for certain applications, it is a cost-effective organic supplement. The Florida Potting Soils manufacturing facilities are located near Orlando, Florida and Valdosta, Georgia.
"This acquisition will solidify Sun Gro's leadership in the large and growing Florida horticultural market, which we currently supply with Canadian sphagnum peat-based products," said Mitch Weaver, President and CEO of Sun Gro Horticulture Canada Ltd. (Sun Gro or the company) and a Trustee of the Fund. "It will also put us at the forefront of our industry in the south-eastern United States. With our acquisitions in California earlier this year, we will now have manufacturing facilities in each of the four largest professional markets in the US."
"The transaction directly supports our strategy to increase our business in the bulk bark-based growing media sector, a relatively new and important product category for Sun Gro," Weaver continued. "By giving us a physical presence near Florida's local bark supplies, it will allow us to better meet demand for competitively-priced bark mixes while also enabling us to develop a niche business in golf course construction and maintenance."
Weaver stated that the acquisition of Grow Best Holdings is expected to be modestly accretive to the Fund's unitholders in the remaining quarter of 2007. Beginning in 2008, the acquired operations are expected to add an estimated US$32 million in annual sales.
The transaction will be Sun Gro's fourth acquisition in 2007. In January 2007, the company established a local manufacturing presence in California, North America's largest horticultural market, by acquiring Sun-Up Horticulture in Sacramento and Kellogg-Rich Grow, LLC in Santa Maria. In June 2007, Sun Gro acquired Quebec-based peat moss producer Tourbiere Omer Belanger Inc., strengthening its long-term peat supply in Eastern Canada and increasing the geographic diversity of its peat harvest resources.
Income Fund Profile
Sun Gro Horticulture Income Fund was launched with the completion of an Initial Public Offering of 22,023,000 trust units on March 27, 2002. The Fund is dependent on Sun Gro's operations, with monthly distributions to its unitholders based entirely on Sun Gro's performance.
Company Profile
Sun Gro was founded in 1929 in Vancouver, BC and has grown to become North America's largest producer of sphagnum peat, and the largest distributor of peat moss and peat and bark-based growing media to professional plant growers in the US and Canada. Sun Gro sells its professional products primarily to greenhouse, nursery and specialty crop growers, as well as to golf course developers and landscapers. Sun Gro also sells peat moss and peat-based growing mixes to retail customers, either by way of private label partnerships or under its own brand names. Approximately 80% of the company's sales volume goes to the US.
Sun Gro currently has approximately 63,000 acres of peat bogs under lease. On completion of the Grow Best Holdings acquisition, the company's North America-wide production network will comprise 14 Canadian peat and peat-mixing plants and 13 US peat and bark-mixing plants.
Forward-Looking Statements
This news release contains forward-looking statements. These statements relate to future events or future performance and reflect Sun Gro's expectations regarding its growth, results of operations, performance, business prospects, opportunities or industry performance or trends. These forward-looking statements reflect management's current internal projections, expectations or beliefs and are based on information currently available. In some cases, forward-looking statements can be identified by terminology such as "may", "will", "should", "expect", "intend", "plan", "anticipate", "believe", "predict", "potential", "continue" or the negative of these terms or other comparable terminology. A number of factors could cause actual events or results to differ materially from those discussed in the forward-looking statements. Important factors that could cause actual results to differ materially from Sun Gro's expectations include, among other things, failure to complete the proposed acquisition, unexpected integration issues, fluctuations in currency exchange rates, changes in tax laws, the impact of adverse weather conditions on harvesting operations, an increase in freight rates, and the impact of an increase in fuel costs. You should specifically consider these factors, including the risks and uncertainties described in the Fund's most recent annual information form for the year ended December 31, 2006. In addition, the Fund's ability to make distributions to unitholders is entirely dependent on Sun Gro's performance. Although management believes that the forward-looking statements contained in this news release are based on reasonable assumptions, readers cannot be assured that actual results will be consistent with such statements. Forward-looking statements are made as of the date of this news release and Sun Gro assumes no obligation to update or revise them to reflect new events or circumstances, except as required by law.
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