SUN GRO AGREES TO FRIENDLY TAKEOVER BY IKO FOR $6.60 PER SHARE IN CASH

Trading Symbol: The Toronto Stock Exchange - GRO

VANCOUVER, Jan. 16 /CNW/ - Sun Gro Horticulture Inc., formerly Sun Gro Horticulture Income Fund ("Sun Gro"), today announced that it has entered into a support agreement (the "Support Agreement") with IKO Enterprises Ltd. ("IKO"), a privately-held Canadian manufacturing and distribution company with operations throughout North America and Europe. Pursuant to the Support Agreement, IKO has agreed, subject to certain conditions, to make an offer to acquire all of the issued and outstanding common shares of Sun Gro, other than shares held by IKO and its affiliates and joint actors, for a price per share of C$6.60 in cash (the "Offer"). IKO and its affiliates and joint actors currently own or control approximately 19% of Sun Gro's outstanding shares.

The C$6.60 cash price per share under the Offer represents a premium of 56% over the volume-weighted average trading price for Sun Gro units for the 20 days prior to September 7, 2010, the date that Sun Gro announced its intention to form a Special Committee and seek strategic alternatives, and a 28% premium over the 20-day volume-weighted average trading price prior to the date of this announcement.

The Offer will be effected by way of a takeover bid. Full details of the Offer will be contained in a formal offer and takeover bid circular, which is expected to be mailed to Sun Gro shareholders before February 2011. The transaction is expected to close in March 2011. The Offer will be subject to certain customary conditions, including a condition that the number of shares tendered into the Offer and not withdrawn, together with the shares held by IKO and its affiliates and joint actors, equals at least 66 2/3% of the total number of outstanding Sun Gro shares.

The proposed sale of Sun Gro to IKO follows the formal review of strategic alternatives commenced by Sun Gro in September 2010 in order to enhance shareholder value. "We are satisfied that the transaction with IKO results in the best value available to our shareholders," said Mitch Weaver, President and CEO of Sun Gro and a member of its Board of Directors (the "Board"). The Board has unanimously determined that the Offer is fair to Sun Gro shareholders and is in the best interests of Sun Gro and its shareholders.  Accordingly, the Board recommends that shareholders tender their shares to the Offer. The Board has received an opinion from Blair Franklin Capital Partners Inc. that the consideration to be received under the Offer is fair, from a financial point of view, to Sun Gro shareholders, other than IKO and its affiliates and joint actors ("Fairness Opinion"). All members of the Board intend to tender all shares that they own to the Offer. A copy of the Fairness Opinion, the factors considered by the Board and the Special Committee of the Board in recommending that holders of Sun Gro shares tender their shares to the Offer and other relevant background material will be included in the directors' circular that will be sent to Sun Gro shareholders concurrently with IKO's formal offer and takeover bid circular.

The Support Agreement provides for customary deal protections, including a non-solicitation covenant by Sun Gro, a five business day right for IKO to match any superior proposal received by Sun Gro and payment by Sun Gro to IKO of a termination fee of approximately C$5.15 million if the Offer is not completed in specified circumstances. The Offer is not subject to a financing condition. A copy of the Support Agreement and, once mailed, a copy of the  takeover bid circular and directors' circular and certain related documents will be available on SEDAR at www.sedar.com.

Speaking on behalf of IKO, Derek Fee, Manager of Corporate Communications said, "We are very pleased to be increasing our ownership interest in Sun Gro and look forward to building on this outstanding company's more than 80 years of leadership and innovation in the growing media industry."

Blair Franklin Capital Partners Inc. is acting as exclusive financial advisor to Sun Gro, and Borden Ladner Gervais LLP is acting as legal counsel. Bennett Jones LLP and the Law Firm of Norman H. Winter are acting as legal counsel to IKO.

In addition, in connection with its conversion to a corporation, Sun Gro announces that it adopted a shareholder rights plan (the "Plan") effective January 1, 2011 on the same substantive terms as the unitholder rights plan previously adopted by Sun Gro Horticulture Income Fund and described in the press release dated September 7, 2010. Under the Plan, the Board authorized the issuance of one share purchase right with respect to each share of Sun Gro outstanding as of January 1, 2011. The Plan is subject to TSX acceptance, and is scheduled to expire on March 7, 2011 unless approved by shareholders prior to that date. A full copy of the rights plan will be available at www.sedar.com

About IKO

The IKO group of companies is a global leader in the manufacture and supply of commercial and residential roofing, waterproofing, and insulation board products. Founded in Calgary, Alberta in 1951, the family owned business has grown to include more than 20 manufacturing plants and 3000 employees worldwide.  

About Sun Gro

Sun Gro is the largest producer and distributor of peat and bark-based growing mixes to professional plant growers in the US and Canada. It is also North America's largest producer and distributor of sphagnum peat moss, with approximately 65,000 acres of peat bogs under lease. Sun Gro sells its professional products primarily to greenhouse, nursery and specialty crop growers. The company also sells peat moss and potting mixes to retail customers, either by way of private label partnerships or under its own brand names. In addition, Sun Gro sells sand-based mixes to golf course developers and landscapers. The company's North America-wide production network now comprises 12 Canadian plants and 13 US plants.

Forward-Looking Statements

Certain statements contained in this news release are forward-looking statements and information within the meaning of applicable Canadian securities legislation (collectively "forward-looking statements"), including statements relating to the expected timing of mailing of the Offer and the closing thereof, and any other statements that are not historical facts. The terms "expected", "will" and "intend to", and similar terms and phrases are intended to identify these forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results to differ materially from those implied by these forward-looking statements, including, but not limited to: IKO's ability to complete the Offer in the time period contemplated, if at all, which is dependent upon the parties' ability to comply with the closing conditions to the transaction, some of which are beyond the control of Sun Gro and IKO; general economic conditions; the state of the capital markets; foreign currency and exchange risk; performance of the market sectors that Sun Gro serves; and other risks detailed from time to time in Sun Gro's filings with Canadian provincial securities regulators. These factors should be considered carefully, and readers should not place undue reliance on forward-looking statements made by Sun Gro or IKO.

Although Sun Gro believes that the expectations reflected by the forward-looking statements presented in this release are reasonable, the forward-looking statements have been based on assumptions and factors concerning future events that may prove to be inaccurate. Those assumptions and factors are based on information currently available to Sun Gro. Any forward-looking statement speaks only as of the date on which such statement is made, and, except as required by applicable law, Sun Gro undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events.

SOURCE Sun Gro Horticulture Inc.

For further information:

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

Derek Fee
Manager - Corporate Communications
IKO
Tel: (416) 780-5898
Email: derek.fee@iko.com
Website: www.iko.com

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Sun Gro Horticulture Inc.

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