Miracle-Gro subsidiary accuses investment firm of cannabis ploy

Scotts Miracle-Gro

07/02/2023 21:35

By Mike Scarcella
       Feb 7 (Reuters) - A subsidiary of Scotts Miracle-Gro Co
 SMG.N  has sued an investment management company in U.S. court,
claiming that it tried to "ruin" the lawn and garden affiliate's
$175 million interest in a cannabis industry acquisition firm.
    In a lawsuit in Manhattan federal court, Scotts Miracle-Gro
subsidiary Hawthorne Collective Inc and a related entity on
Monday accused JW Asset Management LLC and cannabis operator
TerrAscend Corp of violating U.S. antitrust law in their bid to
dominate the board of directors of the cannabis acquisition
firm, RIV Capital Inc  RIV.CD . JW Asset Management controls
TerrAscend.
    Hawthorne's lawsuit at its core is focused on the future of
the cannabis market in New York. RIV Capital, with the help of
Hawthorne's multimillion-dollar investment, last year acquired
New York-area cannabis cultivation and retail company Etain LLC
for $247 million.
    TerrAscend, according to the lawsuit, also wanted to buy
Etain, one of the original companies holding a medical marijuana
license in the state.
    JW Asset Management, the largest shareholder in RIV Capital,
has embarked on a quest to oust three directors nominated by
Hawthorne who serve on Toronto-based RIV's board and replace
them with the investment firm's "chosen" picks, according to the
lawsuit.
    "Defendants' attacks on, and attempts to take control of,
RIV Capital violate federal antitrust law," a lawyer for
Hawthorne, Peter Safirstein, wrote in the complaint in the
Southern District of New York federal court.
    A representative from JW Asset Management, based in Armonk,
New York, on Tuesday did not immediately respond to messages
seeking comment. A lawyer had not yet appeared for the company.
A TerrAscend representative did not immediately comment.
    TerrAscend, listed on the Canadian Securities Exchange, has
cannabis operations in California, New Jersey, Maryland and
elsewhere.
    Hawthorne said in the lawsuit that the "series of
anticompetitive or otherwise wrongful and improper actions" were
undertaken "to stop RIV Capital's entry into the New York-New
Jersey market." The lawsuit claimed that stopping RIV Capital's
move into New York would reduce industry competition, to the
benefit of TerrAscend.
    Safirstein did not immediately reply to a message seeking
comment, and neither did a representative from Ohio-based
Scotts, which saw $3.92 billion in sales for fiscal year 2022.
    Scotts created the Hawthorne Collective in 2021 for
"strategic minority investments" in certain areas of the
cannabis industry. The company said at the time the addition of
Hawthorne Collective allowed it to "explore and pursue new
opportunities."
    The case is The Hawthorne Gardening Company v. JW Asset
Management LLC, U.S. District Court, Southern District of New
York, No. 1:23-cv-00979.
    For plaintiffs: Peter Safirstein of Safirstein Law
    For defendants: Not yet available
 (Reporting by Mike Scarcella)