Benzinga | Aug 4, 2021 08:33AM EDT

Hydrofarm Holdings Continues Buying Spree With $83M Purchase Of Greenstar Plant Products

Hydroponics equipment producer Hydrofarm Holdings Group (NASDAQ: HYFM) confirmed Tuesday it has acquired a Canadian nutrient business Greenstar Plant Products, Inc. for $83 million.

What happened

Hydrofarm funded the purchase price of $83 million for the Greenstar acquisition using both cash and the company's current credit facility. Rothschild & Co. acted as a financial advisor and DLA Piper as a legal advisor to the company.

Under the agreement, the producer of the Grotek and Gaia Green brands will become a wholly-owned indirect subsidiary of Hydrofarm.

Why it matters

Greenstar is projected to hit around $26 million in net sales this year, which should be a significant improvement from 2020. Previously, Hydrofarm was distributing Greenstar's Grotek and Gaia brands accounting for around 50% of Greenstar's total net sales.

The acquisition should improve Hydrofarms' adjusted EBITDA margin for the 2021 fiscal year, making the transaction accretive through the addition of Greenstar's manufacturing profit margin profile and the part of the sales that it did not previously represent.

The purchase is part of the company's strategic plans to buy producers of branded products in the nutrients, lighting, climate control and media sectors.

"With a long relationship that has grown organically over the years, the addition of Greenstar to the Hydrofarm family feels like a natural next step in our efforts to broaden our company's footprint and strengthen our product portfolio," Bill Toler, chairman and CEO of Hydrofarm stated.

"We're excited about the many opportunities becoming a part of Hydrofarm will create and to play a role in the company's growth," said Michael Nemirow, CEO of Greenstar Plant Products, Inc. "Over the years, we've established a great working relationship based on a passion for the future of Controlled Environment Agriculture and the horticultural market overall, along with our shared commitment to delivering quality products and service."

The purchase comes on the heels of the previous one, when the Fairless Hills, Pennsylvania-based company acquired Oregon-based organic hydroponic products manufacturer and supplier Aurora Innovations, Inc., Aurora International, Inc. and Gotham Properties LLC for $161 million.

Price action

Hydrofarms' shares closed Tuesday market session 0.85% lower at $49.02 per share.

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