(UPDATE) Central Garden Shares Plummet On Scotts Co.'s Plans To Alter Pact
Dow Jones Online News, Monday, July 12, 1999 at 16:38
NEW YORK -(Dow Jones)- Shares of Central Garden & Pet Co., a distributor and maker of garden and pet supplies, plunged Monday after the company announced that yard-products giant Scotts Co. plans to change its distribution system. Central Garden expects to post one-time charges against results for the fiscal year.
At the close, the Nasdaq-listed stock (CENT) was down $1.438, or 14%, at $8.875, on volume of about 5.9 million shares, compared with average daily volume of about 383,000.
After the exclusive pact ends in September, Scotts's (SMG) new distribution system will involve a combination of distributors, of which Central Garden will be the largest. Scotts also said it will handle some direct sales of its Ortho pesticides and Roundup herbicide products to major retailers and intends to sell Miracle-Gro directly to certain retailers.
Scotts assumed the Central Garden agreement when it acquired Monsanto Co.'s Solaris home-and-garden division for about $300 million last year.
Central Garden said the business likely to be taken over by Scotts next year is estimated to be worth about $200 million to $250 million in sales, the gross profit of which will be about $15 million to $25 million for this year. Central Garden said it expects to offset the lost profits next year through expense reductions and growth in other businesses.
Central Garden, which had sales of $1.3 billion in 1998, said it expects to record "substantial" charges in the fiscal year ending in September, related to a realignment of its lawn and garden distribution operations to reflect business levels for fiscal 2000.
As a result of the changes in Scotts' distribution system, Central Garden said inventory of Scotts products and the related payables are likely to be reduced by an amount estimated to be in excess of $100 million.
Meanwhile, Monsanto (MTC), a St. Louis-based seed and pharmaceutical company, said it will be the exclusive marketing and distribution agent for Scotts' Roundup products in the U.S. and most major international markets.
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