$AERO Reports that The Scotts Miracle-Gro Company

• Exercise generates $47.8 million in cash for the Company
• Board of Directors declares a $41 million, $1.21 per share distribution
• $6.8 million retained to retire all debt, fund working capital and growth

AeroGrow International, Inc. ( OTCQB : AERO ) (News) (“AeroGrow” or the “Company”), the manufacturer and distributor of the world’s leading indoor gardening systems — the AeroGarden line of Smart Countertop Gardens™ — announced that SMG Growing Media, Inc. (SMG), a wholly owned subsidiary of The Scotts Miracle-Gro Company, exercised all of its outstanding warrants to acquire common stock of AeroGrow on November 29, 2016.

The warrant exercise generates $47.8 million for AeroGrow, in exchange for 21.6 million shares in the Company to be issued to SMG, bringing the total outstanding shares in AeroGrow to approximately 33.9 million beneficial shares. The warrant exercise price was established by a formula negotiated during SMG’s 2013 purchase of approximately 31% of the Company’s common shares.

The Board of Directors of the Company was restructured effective November 29 to reflect SMG’s new ownership position. As part of these changes, Board member and CEO J. Michael Wolfe, and Board member Michael S. Barish resigned their Board seats, as of November 29. Mr. Wolfe will remain in his capacity as President and CEO of the Company. Jack J. Walker and Wayne Harding will remain on the Board as independent directors. Chris Hagedorn, GM of The Hawthorne Gardening Company, a wholly-owned subsidiary of ScottsMiracle-Gro focused primarily on the areas of indoor and urban gardening, will assume the position of Chairman of the Board, replacing Mr. Walker who has served in this capacity since 2008.

Two new Board members were appointed effective November 29, Peter D. Supron and Albert J. Messina. Mr. Supron, an 18-year veteran at The Scotts Miracle-Gro Company, is currently the Chief of Staff to the President and COO of ScottsMiracle-Gro, and has been a non-voting observer on AeroGrow’s Board since 2013. Mr. Messina is the Finance and Strategy Lead at The Hawthorne Gardening Company and brings a background in corporate development, strategic planning and investment banking to the Board.

Of the $47.8 million received by AeroGrow following the exercise of the warrants:

• The new Board immediately declared a $41 million distribution ($1.21 per share) to shareholders of record on December 20, 2016, with a payout date for the distribution of January 3, 2017.
• $6.8 million will remain in the Company to fully repay the working capital loan to ScottsMiracle-Gro and provide working capital to fund operations and growth.

“When we first signed our deal with The Scotts Miracle-Gro Company in April of 2013 I described that as a transformational event for AeroGrow. That transformation continues now with another red letter day for our company,” said J. Michael Wolfe, President and CEO of AeroGrow. “We’ve come a long way over the past three years — effectively tripling our business, significantly improving our bottom line, greatly expanding our distribution and launching a series of innovative new products.

“The capital generated by the warrant exercise allows us to be instantly debt-free and provides the working capital to fund our anticipated growth for the foreseeable future. We’ll use that capital to accelerate the development of several exciting new products, further expand existing distribution channels, open significant new markets in North America and in other international markets, and fund increased advertising media to generate product, brand and category awareness. In addition, shareholders will receive a very attractive distribution.

“At this inflection point in AeroGrow’s history, I’d like to thank the many stakeholders in our company who have supported us over a long period of time. I’d particularly like to acknowledge Chris Hagedorn, Pete Supron and other key players with The Scotts Miracle-Gro Company who have been so instrumental in helping with our turnaround. I’d also like to thank Mike Barish, who invested in the company early and lent his significant expertise on our Board of Directors for many years. And I’d like thank our key retail and online selling partners along with an incredibly supportive vendor community who have helped our company gain traction and now begin to thrive. And finally I’d like to recognize an exceptional team of associates here at AeroGrow who have worked tirelessly to help build our company.

“In closing, I couldn’t be more excited for our future and the opportunities that this creates for AeroGrow. We stand poised — and well-funded — to seize the opportunities created by our highly innovative and expanding technologies.”