Florida acquistion to support strategic growth of Sun Gro's Bulk Bark Mix business and strengthen south-eastern US market coverage



    Trading Symbol: The Toronto Stock Exchange - GRO.UN

    VANCOUVER, Oct. 1 /CNW/ - Sun Gro Horticulture Income Fund (the Fund)
today announced that it, together with its wholly owned subsidiary, Sun Gro
Holdings, Inc., will acquire all of the outstanding shares of Grow Best
Holdings, LLC for US$20.3 million. Grow Best Holdings owns Florida Potting
Soils, Inc. and Sunshine Peat, Inc., both based in Orlando, Florida. In
addition to the outstanding shares, Sun Gro Holdings will purchase real estate
and equipment used in the business for US$2.1 million. The transaction is
expected to close later today and will be funded through the issuance of
US$2 million of trust units of the Fund and borrowings of US$20.4 million
under a new acquisition line of credit.
    Florida Potting Soils primarily sells bulk bark growing mixes to
nurseries in Florida and neighbouring states, and also produces and sells
custom sand and peat-based blends for golf course construction and
maintenance. It is the largest producer of professional mixes in Florida.
Sunshine Peat harvests "muck" peat from a central Florida bog and supplies it
to Florida Potting Soils for use as a raw material in custom mixes. This grade
of peat does not have the same air and water retention characteristics as
Canadian sphagnum peat but, in mixes for certain applications, it is a
cost-effective organic supplement. The Florida Potting Soils manufacturing
facilities are located near Orlando, Florida and Valdosta, Georgia.
    "This acquisition will solidify Sun Gro's leadership in the large and
growing Florida horticultural market, which we currently supply with Canadian
sphagnum peat-based products," said Mitch Weaver, President and CEO of Sun Gro
Horticulture Canada Ltd. (Sun Gro or the company) and a Trustee of the Fund.
"It will also put us at the forefront of our industry in the south-eastern
United States. With our acquisitions in California earlier this year, we will
now have manufacturing facilities in each of the four largest professional
markets in the US."
    "The transaction directly supports our strategy to increase our business
in the bulk bark-based growing media sector, a relatively new and important
product category for Sun Gro," Weaver continued. "By giving us a physical
presence near Florida's local bark supplies, it will allow us to better meet
demand for competitively-priced bark mixes while also enabling us to develop a
niche business in golf course construction and maintenance."
    Weaver stated that the acquisition of Grow Best Holdings is expected to
be modestly accretive to the Fund's unitholders in the remaining quarter of
2007. Beginning in 2008, the acquired operations are expected to add an
estimated US$32 million in annual sales.
    The transaction will be Sun Gro's fourth acquisition in 2007. In January
2007, the company established a local manufacturing presence in California,
North America's largest horticultural market, by acquiring Sun-Up Horticulture
in Sacramento and Kellogg-Rich Grow, LLC in Santa Maria. In June 2007, Sun Gro
acquired Quebec-based peat moss producer Tourbière Omer Belanger Inc.,
strengthening its long-term peat supply in Eastern Canada and increasing the
geographic diversity of its peat harvest resources.

    Income Fund Profile

    Sun Gro Horticulture Income Fund was launched with the completion of an
Initial Public Offering of 22,023,000 trust units on March 27, 2002. The Fund
is dependent on Sun Gro's operations, with monthly distributions to its
unitholders based entirely on Sun Gro's performance.

    Company Profile

    Sun Gro was founded in 1929 in Vancouver, BC and has grown to become
North America's largest producer of sphagnum peat, and the largest distributor
of peat moss and peat and bark-based growing media to professional plant
growers in the US and Canada. Sun Gro sells its professional products
primarily to greenhouse, nursery and specialty crop growers, as well as to
golf course developers and landscapers. Sun Gro also sells peat moss and
peat-based growing mixes to retail customers, either by way of private label
partnerships or under its own brand names. Approximately 80% of the company's
sales volume goes to the US.
    Sun Gro currently has approximately 63,000 acres of peat bogs under
lease. On completion of the Grow Best Holdings acquisition, the company's
North America-wide production network will comprise 14 Canadian peat and
peat-mixing plants and 13 US peat and bark-mixing plants.

    Forward-Looking Statements

    This news release contains forward-looking statements. These statements
relate to future events or future performance and reflect Sun Gro's
expectations regarding its growth, results of operations, performance,
business prospects, opportunities or industry performance or trends. These
forward-looking statements reflect management's current internal projections,
expectations or beliefs and are based on information currently available. In
some cases, forward-looking statements can be identified by terminology such
as "may", "will", "should", "expect", "intend", "plan", "anticipate",
"believe", "predict", "potential", "continue" or the negative of these terms
or other comparable terminology. A number of factors could cause actual events
or results to differ materially from those discussed in the forward-looking
statements. Important factors that could cause actual results to differ
materially from Sun Gro's expectations include, among other things, failure to
complete the proposed acquisition, unexpected integration issues, fluctuations
in currency exchange rates, changes in tax laws, the impact of adverse weather
conditions on harvesting operations, an increase in freight rates, and the
impact of an increase in fuel costs. You should specifically consider these
factors, including the risks and uncertainties described in the Fund's most
recent annual information form for the year ended December 31, 2006. In
addition, the Fund's ability to make distributions to unitholders is entirely
dependent on Sun Gro's performance. Although management believes that the
forward-looking statements contained in this news release are based on
reasonable assumptions, readers cannot be assured that actual results will be
consistent with such statements. Forward-looking statements are made as of the
date of this news release and Sun Gro assumes no obligation to update or
revise them to reflect new events or circumstances, except as required by law.

    %SEDAR: 00017490E




For further information:

For further information: Bradley A. Wiens, Vice-President, Finance and
CFO, Sun Gro Horticulture Canada Ltd., Tel: (425) 373-3603, Email:
bradw@sungro.com, Website: www.sungro.com

Organization Profile

SUN GRO HORTICULTURE INCOME FUND

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