ScottsMiracle-Gro Co. has created a new subsidiary—the Hawthorne Collective—to invest in the legal cannabis industry and announced a $150 million loan to Toronto, Canada-based RIV Capital, a cannabis investment and acquisition firm listed on the Toronto Stock Exchange.
The loan is a six-year convertible note which accrues 2.03% interest annually for the first two years and includes follow-on investment rights. Upon conversion, ScottsMiracle-Gro would own about 42% of the RIV.
Jim Hagedorn, chairman and chief executive officer (CEO) for ScottsMiracle-Gro, said the addition of Hawthorne Collective allows the company “to explore and pursue new opportunities in an industry that is poised for significant growth in the years ahead.”
“By making a minority, non-equity investment in RIV Capital, this initial transaction will have little near-term impact on our financial performance. While this approach means we will employ capital that won’t be available for near-term investments with a more immediate return, we are confident our partners at RIV Capital and our long-term approach ultimately will drive meaningful value for our shareholders.”— Hagedorn in a press release
With the investment, RIV said it now has about $319 million in available capital, at current exchange rates. Narbé Alexandrian, president and CEO for RIV, said the investment “opens opportunities for considerable value creation and growth” for the firm.
“With ScottsMiracle-Gro’s strong track record, reputation, and brand awareness, we can build upon lessons learned in both the Canadian and U.S. cannabis markets, and leverage their insights to optimize our acquisition and investment strategy,” he said in a statement.
The Hawthrone Collective will also have the right to nominate up to three members to RIV’s board of directors, which will be increased to seven. Neither the Hawthorne Collective nor ScottsMiracle-Gro will have an active day-to-day role in RIV nor the companies in which it invests.
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