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Miracle-Gro subsidiary accuses investment firm of cannabis ploy

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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


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