Hydrofarm enters agreement with CM Fabrication to sell assets for $8.7M

On May 10, 2024, in connection with the Company’s restructuring of its durable manufacturing operations, the Company entered into an agreement with CM Fabrication to sell assets relating to the production of certain durable equipment products for approximately $8.7 million. The Asset Sale is expected to close in the second quarter of 2024, subject to customary closing conditions. The Company is also entering into an exclusive supply agreement with the Buyer to provide for contract manufacturing going forward for the Company’s proprietary branded Innovative Growers Equipment products. The Company will continue to sell its proprietary branded IGE products, and as a result of the transaction, the Company expects improved profitability on future IGE branded product sales due to an anticipated decrease in fixed costs. The Company estimates it will record a loss on the disposition of the tangible and intangible assets of approximately $12 million in the second quarter of 2024, upon closing of the Asset Sale. The Company plans to reinvest the net proceeds from the Asset Sale into certain permitted investments, such as capital expenditures, and/or make an offer to prepay the corresponding amount of Term Loan principal.