Item 2.01 Completion of Acquisition or Disposition of Assets.
On May 3, 2021, Hydrofarm Holdings Group, Inc. (the "Company") completed the
previously announced acquisition of 100% of the issued and outstanding
membership interests of Field 16, LLC, a Delaware limited liability company
("HEAVY 16"), pursuant to the terms of the unit purchase and contribution
agreement, dated as of April 26, 2021 (the "Purchase Agreement"), by and among
the Company, HEAVY 16, F16 Holding LLC, a California limited liability company
(the "Seller"), and the members of the Seller, for a purchase price of up to
$78.1 million, consisting of $63.1 million in cash and $15 million of its common
stock (the "Equity Consideration"), subject to customary adjustments at closing
for cash, working capital, transaction expenses and indebtedness of HEAVY 16
(the "Acquisition"). The purchase price includes a potential earn out payment of
up to $2.5 million based on achievement of certain performance metrics. In
connection with the Acquisition, the Company intends to enter into employment
agreements with certain key employees of HEAVY 16.
HEAVY 16 is a leading manufacturer and supplier of branded plant nutritional
products, with nine core products that are currently sold to approximately 300
retail stores across the U.S. The HEAVY 16 products feature a full line of
premium nutrients with nine core products used in all stages of plant growth,
helping to increase the yield and quality of crops. The Company believes that
the strategic combination of its leading distribution capabilities and HEAVY
16's branded nutrient capabilities will enable the HEAVY 16 brand to rapidly
grow across the Company's existing customer base. In addition, the Company
believes there will be an opportunity to use its distribution platform outside
the U.S. to offer the HEAVY 16 products internationally. Moreover, by broadening
the Company's proprietary branded offerings into the plant nutrients category,
the Company anticipates that the Acquisition will also enable it to further
serve the needs of its retail partners and commercial growers as it continues to
penetrate the market. The Company has acquired approximately 70 SKUs in the
nutrient category and a new 25,000 square foot manufacturing facility in
Paramount, California with cutting edge blending, bottling and filling
equipment. Approximately 15 employees from HEAVY 16 have joined the Company.
The foregoing description of the Purchase Agreement does not purport to be
complete and is qualified in its entirety by reference to the provisions of the
Purchase Agreement, a copy of which was filed as Exhibit 10.38 to the Company's
registration statement on Form S-1 (File No. 333-255510).
Item 3.02 Unregistered Sales of Equity Securities
The information regarding the Purchase Agreement and the issuance of the Equity
Consideration contemplated thereunder set forth in Item 2.01 of this Current
Report on Form 8-K is incorporated into this Item 3.02 by reference. The Equity
Consideration was issued in reliance upon an exemption from the registration
requirements of the Securities Act of 1933, as amended, pursuant to
Section 4(a)(2) thereof, which exempts transactions by an issuer not involving
any public offering.
Item 7.01 Regulation FD Disclosure.
On May 4, 2021, the Company issued a press release announcing the closing of the
Acquisition. A copy of the press release is attached as Exhibit 99.1 and
incorporated herein by reference.
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