Shares of Calavo Growers Inc. (NASDAQ: CVGW) experienced a notable surge in after-hours trading, climbing nearly 13% to $25.50. This increase followed the company’s latest financial disclosures and the formal announcement of a merger agreement with another California-based company, Mission Produce Inc. (NASDAQ: AVO).
Details of the Merger Agreement
Calavo Growers has entered into a definitive agreement to be acquired by Mission Produce. The deal sets the acquisition price for Calavo shares at $27 per share. This valuation is based on Mission Produce’s volume-weighted average price over 30 trading days, ending on January 13. The transaction structure includes a combination of cash and stock consideration, specifically $14.85 in cash plus 0.9790 shares of Mission for each share of Calavo.
According to official statements, shareholders of Mission Produce are expected to hold approximately 80.3% ownership in the combined entity post-merger, while Calavo shareholders will own about 19.7%. The transaction aims to realize approximately $25 million in cost synergies, enhancing operational efficiencies. Completion is anticipated by August, pending the usual regulatory approvals and shareholder consents.
Financial Performance for Fiscal Year 2025
Calavo Growers reported robust financial results for its fiscal year ending October 31, 2025. Net income from continuing operations surged to $20 million, marking a 192% increase compared to the $6.8 million recorded in fiscal 2024.
The company’s adjusted net income from continuing operations rose 42% to $28.9 million, translating to $1.62 per diluted share. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) grew 12%, reaching $40.8 million, up from $36.5 million the previous year.
Despite these improvements, total net sales declined modestly to $648.4 million, down from $661.5 million in the previous fiscal year.
Quarterly Highlights for Q4
In the fourth quarter, Calavo Growers’ net sales decreased to $124.7 million from $170 million recorded in the same quarter a year earlier. However, the company reversed a previous quarterly net loss to report a net income from continuing operations of $3.8 million, compared to a net loss of $2.5 million in the fourth quarter of fiscal 2024.
Trading Metrics and Market Position
As of recent trading, Calavo’s Relative Strength Index (RSI) is at 64.92, suggesting moderate momentum. Over the past 12 months, the company’s stock price has seen a slight increase of 0.27%, indicating a generally stable but mild upward trend over the longer term.
Calavo’s market capitalization stands at approximately $403.13 million. Within the last 52 weeks, the stock price has fluctuated between a low of $18.40 and a high of $28.72. Closing recently at $22.58, the stock had gained 1.71% during the regular trading session before the after-hours surge.
The current stock price sits near 40.54% of its 52-week trading range, situating it closer to the lower boundary than the upper one. Further metrics from equity ranking services reflect a high value score of 83.39, denoting favorable valuation characteristics relative to peers.
Outlook and Transaction Impact
The combination with Mission Produce is expected to reshape the competitive landscape for Calavo Growers. The merger promises to bring operational savings along with expanded market capabilities. However, the finalization of the deal remains contingent on a series of approvals from both regulatory bodies and shareholders.
Summary
In summary, Calavo Growers’ shares responded strongly to the merger announcement and solid fiscal results. While the company faces a decline in sales, its profitability measures have improved markedly. The pending acquisition by Mission Produce is poised to consolidate the two firms’ strengths and deliver expected cost efficiencies, creating notable shareholder value potential pending successful closure.
Key Points
- Calavo Growers agreed to be acquired by Mission Produce at $27 per share, combining cash and stock components.
- Fiscal year 2025 showed a 192% increase in net income from continuing operations despite a slight sales decline.
- The merger is projected to generate $25 million in cost synergies and could close by August, subject to approvals.
- Q4 sales declined, but profitability turned positive compared with a loss in the previous year’s quarter.
Risks and Uncertainties
- The proposed transaction’s completion depends on regulatory clearances and shareholder approval, which introduces uncertainty around timing and successful closing.
- Decreased overall net sales in both the full year and fourth quarter may challenge sustained profitability improvement.
- Market volatility and trading position nearer to the lower end of its annual range could affect investor sentiment.
- Integration risks post-merger could impact realization of the anticipated $25 million in cost synergies.