Scotts Miracle-Gro announced an agreement with Monsanto that offers opportunities to extend the Roundup brand into new lawn and garden categories and geographies.
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The two companies also have reached a technology sharing agreement and have made amendments to the existing Roundup Agency Agreement that provide greater long-term security for ScottsMiracle-Gro.
The agreement provides ScottsMiracle-Gro with:
The ability to extend the Roundup brand into other categories of lawn and garden beyond non-selective weed control globally. This includes the ability to introduce the brand into the lawn service industry for the first time.
The opportunity to introduce the consumer Roundup brand into geographies not included in the original Agency Agreement, including China and Latin America. Only Japan and countries with U.S. trade embargoes are excluded from the agreement.
The opportunity to make changes to product formulations if it is deemed necessary in order to grow and/or protect the Roundup brand.
A right of first offer and a significant credit to the purchase price, equal to the termination fee, in the event Monsanto were to sell the consumer Roundup business.
A "first look" related to Monsanto's innovation pipeline. ScottsMiracle-Gro would be provided with access to technology that can be applied in order to bring new consumer offerings to the lawn and garden marketplace.
Enhanced security, as termination of the agreement no longer includes specific performance criteria. In the event Monsanto terminates the agreement, in certain circumstances, the Company would receive a termination fee of no less than $200 million and would retain its agency rights for at least 5 years.
The expanded ability for the Company to transfer, and thereby monetize, its rights as marketing agent to a third party. This provision contemplates two possibilities: ScottsMiracle-Gro is permitted to transfer its rights in any specific geography to a third party; and The entire agreement can be transferred to a third party in the event that ScottsMiracle-Gro is acquired.
ScottsMiracle-Gro has agreed to pay Monsanto $300 million in connection with these and other amendments to the current Agency Agreement and the brand extension and joint technology agreements. Financing will be accommodated under the Company's existing credit facility.
Because the ability to introduce new products and enter new geographies could take several years, the amended agreement modifies the existing commission structure. The result of the new structure is expected to offset financing costs and the expenses required for the development of new Roundup products and services. ■