Central Garden's (CENT) Green Garden Buyout to Aid Garden Wing
Central Garden & Pet Company CENT is committed toward reinforcing its position via prudent buyouts across garden and pet segments. In line with the same commitment, the company has concluded the buyout of Green Garden Products (“Green Garden”) from a private-equity firm, Freeman Spogli & Co. On the last day of December 2020, management unveiled that it has agreed to buy Green Garden, earlier known as Plantation Products, for $532 million.
We note that the buyout was financed via cash and borrowings under the company’s credit facility. Headquartered in Norton, MA, Green Garden is a provider of vegetables, seed starters, herb and flower seed packets, as well as plant nutrients across North America. It ships more than 250 million seed packets annually.
With the addition of Green Garden to Central Garden & Pet’s portfolio, the company looks to expand the business, leverage merchandising, engage in brand building and enhance digital capabilities. Central Garden & Pet’s CEO said, “By adding Green Garden’s leading brands for vegetable, herb and flower seed and seed starter packages, we are entering an important adjacent category in the garden segment.”
Acquisition Strategy Drives Sales
We note that acquisitions form an important part of Central Garden & Pet’s strategy. The company has been a disciplined buyer in the garden and pet areas, and concluded more than 50 acquisitions since 1992. Through these buyouts, management looks to enhance its manufacturing capabilities, operating synergies, distribution network, economies of scale and market advantages. Apart from fortifying the company’s portfolio, these buyouts contribute to sales and overall performance.
Recently, it bought DoMyOwn.com, which is a fast-growing online retailer of professional-grade control products in the United States. The deal added best-in-class e-commerce fulfillment platform and digital capabilities to the company’s portfolio, as well as fortified its position in the control product space. With the help of the DoMyOwn acquisition, Central Garden & Pet will be able to tap and cater to rising e-commerce demand.
The company has also concluded the buyout of Hopewell Nursery in early January. Hopewell Nursery is a key commercial grower, which serves garden centers, retail nurseries and wholesalers in the Northeast. The Hopewell buyout, which follows the successful acquisition of Bell Nursery, bolstered the company’s position as a key live goods provider and serves customers with high-quality live plants. Management remains encouraged about the collective industry knowledge of Hopewell and Bell buyouts to drive growth.
In May 2019, Central Garden & Pet acquired C&S Products, which has been complementing the existing wild bird feed business. Prior to this, the company acquired the remaining 55% stake in Arden Companies in February 2019. All these buyouts are fueling this Zacks Rank #2 (Buy) company’s top line.
Clearly, Central Garden & Pet is strengthening its position in the pet supplies, and lawn and garden supplies space. Moreover, it has been developing new products, advancing digital capabilities, optimizing supply chain and focusing on marketing activities. Meanwhile, the company’s ‘Central to Home’ strategy bodes well. Impressively, the California-based firm’s shares have risen 58.3% over the past year versus the industry’s 42.5% rise.
Other Bets in the Broader Consumer Discretionary Space
PVH Corp PVH has an expected long-term earnings growth rate of 18% and a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
BJ's Wholesale Club Holdings BJ has a long-term earnings growth rate of 15.8% and currently holds a Zacks Rank #2.
Rent-A-Center RCII, also a Zacks Rank #2 stock, delivered an average earnings surprise of 12.9% in the trailing four quarters.
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