8-K: Calavo Growers Merges with Mission Produce, Reports FY25

Calavo Growers announces a definitive merger agreement with Mission Produce and reports full-year 2025 financial results showing significant growth in net income despite a decrease in net sales.

Summary

• Calavo Growers, Inc. has entered into a definitive agreement to be acquired by Mission Produce, Inc. in a cash and stock transaction.
• Calavo shareholders will receive $27.00 per share, comprising $14.85 in cash and 0.9790 shares of Mission Produce common stock.
• Upon closing, Calavo shareholders are expected to own approximately 19.7% of the combined company.
• The transaction is anticipated to create $25 million in cost synergies and establish a vertically integrated platform with expanded year-round portfolio.
• For fiscal year 2025, net income from continuing operations increased 192% to $20.0 million, or $1.11 per diluted share.
• Adjusted net income from continuing operations for fiscal year 2025 increased 42% to $28.9 million, or $1.62 per diluted share.
• Adjusted EBITDA from continuing operations for fiscal year 2025 increased 12% to $40.8 million.
• Total net sales for fiscal year 2025 decreased to $648.4 million from $661.5 million in the prior year.
• For the fourth quarter of 2025, total net sales decreased to $124.7 million from $170.0 million in the prior year period.
• Fourth quarter 2025 net income from continuing operations was $3.8 million, compared to a loss of $(2.5) million in the prior year period.

Sentiment

Score: 7

Explanation: The announcement of the strategic merger with Mission Produce is a significant positive, offering shareholders a premium and participation in a larger, vertically integrated entity with expected synergies. While full-year profitability metrics (Net Income, Adjusted Net Income, Adjusted EBITDA) showed strong growth, net sales and gross profit declined, and the Fresh segment faced pricing pressures. The Q1 2026 outlook is softer. The merger's strategic benefits outweigh the mixed operational results for the period.

Positives

• Net income from continuing operations for fiscal year 2025 increased 192% to $20.0 million, compared to $6.8 million in the prior year.
• Adjusted net income from continuing operations for fiscal year 2025 increased 42% to $28.9 million, or $1.62 per diluted share.
• Adjusted EBITDA from continuing operations for fiscal year 2025 increased 12% to $40.8 million, compared to $36.5 million in the prior year.
• Net income from continuing operations for the fourth quarter of 2025 was $3.8 million, a significant improvement from a $(2.5) million loss in the prior year period.
• Adjusted net income from continuing operations for the fourth quarter of 2025 increased 301% to $4.5 million, or $0.25 per diluted share.
• Selling, general, and administrative (SG&A) expenses decreased 6% in Q4 2025 and 16% in FY2025, partly due to reduced FCPA-related legal expenses.
• Prepared segment sales increased 20% in Q4 2025 to $18.4 million and 12% in FY2025 to $71.9 million, driven by higher volumes and new customers.
• Prepared segment gross profit increased 100% in Q4 2025 to $4.0 million and 38% in FY2025 to $17.4 million, reflecting improved operating leverage and lower fruit input costs.
• The strategic combination with Mission Produce is expected to generate $25 million in cost synergies and create significant value for shareholders.
• Ended the fourth quarter with strong liquidity, including $61.2 million in cash and cash equivalents and $97.1 million in available liquidity, with no borrowings under the credit facility.

Negatives

• Total net sales decreased to $124.7 million in Q4 2025 from $170.0 million in the prior year period.
• Total net sales decreased to $648.4 million in fiscal year 2025 from $661.5 million in the prior year.
• Gross profit decreased to $11.6 million in Q4 2025 (impacted by $1.0 million non-recurring costs) and to $63.7 million in FY2025 (impacted by $6.1 million non-recurring costs).
• Fresh segment sales decreased 31% in Q4 2025 to $106.3 million and 4% in FY2025 to $576.5 million, primarily due to lower avocado pricing and volume.
• Fresh segment gross profit decreased 46% in Q4 2025, reflecting lower average selling prices and volumes, and included approximately $0.9 million of discrete costs associated with a temporary FDA detention hold.
• Adjusted EBITDA from continuing operations decreased 24% to $5.0 million in Q4 2025.
• Anticipates softer first quarter 2026 results compared to the prior year, primarily due to continued strong avocado supply and resulting pricing dynamics.
• Experienced several unanticipated challenges in fiscal year 2025, including a temporary facility shutdown, a temporary FDA detention hold on certain avocado imports, and a global avocado supply that pressured pricing.

Risks

• Inability to obtain the requisite Calavo and Mission stockholder approvals for the proposed transaction.
• Risk that governmental and regulatory approvals required for the proposed transaction may not be obtained, or such approvals may result in the imposition of conditions that could adversely affect the combined company or the expected benefits.
• Risk that an event, change, or other circumstance could give rise to the termination of the proposed transaction.
• Risk that a condition to closing of the proposed transaction may not be satisfied, or delays in completing the proposed transaction.
• Risk that the businesses will not be integrated successfully or that the integration will be more costly or difficult than expected.
• Risk that the cost savings and any other synergies from the proposed transaction may not be fully realized or may take longer to realize than expected.
• Risk that any announcement relating to the proposed transaction could have adverse effects on the market price of Calavo's or Mission's common stock.
• Risk of litigation related to the proposed transaction.
• Diversion of management time from ongoing business operations and opportunities as a result of the proposed transaction.
• Risk of adverse reactions or changes to business or employee relationships, including those resulting from the announcement or completion of the proposed transaction.
• Adverse economic conditions, reductions in client spending, or slowdown in payments by clients.
• Risks related to the ability to attract new clients and retain existing clients, and changes in client advertising, marketing, and corporate communications requirements.
• Failure to manage potential conflicts of interest between or among clients.
• Impact of weather on market conditions and seasonality of the business.
• Sensitivity of the business to changes in market prices of avocados and other agricultural products and raw materials (e.g., fuel, packaging, paper).
• Changes or actions associated with USDA-APHIS and Mexican Secretary of Agriculture phytosanitary regulations.
• Potential disruptions to the supply chain.
• Risks associated with potential future acquisitions, including integration challenges.
• Potential exposure to data breaches and other cyber-attacks on systems or those of suppliers/customers.
• Dependence on large customers and key personnel, access to labor, susceptibility to wage inflation, and potential for labor disputes.
• Reliance on co-packers for a portion of production needs.
• Competitive pressures, including from foreign growers.
• Risks of recalls and food-related injuries to customers, and changing consumer preferences.
• Impact of environmental regulations, including those related to climate change, and risks associated with the environment and climate change affecting supply sources.
• Ability to develop and transition new products and services and enhance existing ones.
• Risks associated with doing business internationally, including non-compliance with U.S. and foreign laws, restrictive governmental actions (e.g., trade protection measures, restrictions on fund transfers), and currency fluctuations.
• Risks associated with receivables from, loans to, and/or equity investments in unconsolidated entities.
• Volatility in the value of common stock.
• Impact of macroeconomic trends and events, and effects of increased interest rates on cost of borrowing and consumer purchasing behavior.
• Resolution of pending internal and external investigations, legal claims, and tax disputes, including an assessment imposed by the Mexican Tax Administrative Service (SAT) and defenses against collection activities.
• Ability to realize the expected expense savings from the sale of the Fresh Cut business.
• Risks related to enhanced regulatory scrutiny or inspection protocols, including detention holds by the U.S. Food and Drug Administration, which can result in shipment delays, costs, and inventory write-downs.

Future Outlook

For the first quarter of fiscal 2026, the company expects softer results compared to the same quarter in the prior year, primarily due to continued strong avocado supply and resulting pricing dynamics. The Fresh segment is anticipated to see higher avocado sales volumes but lower average selling prices and lower per unit profit. The Prepared segment is expected to deliver volume-driven sales growth and higher gross profit. Overall, lower Adjusted EBITDA is projected for Q1 2026.

Management Comments

• "We believe combining with Mission Produce represents a compelling next chapter that will enable our combined business to unlock new growth and expand the impact of our trusted Calavo brand, while also providing our shareholders with compelling value and the opportunity to participate as a shareholder of a global leader in a growing sector." B. John Lindeman, President and CEO.
• "I'm proud of our team's performance in the face of several unanticipated challenges in fiscal year 2025. Across the year, we experienced a temporary facility shutdown related to pest remediation, a temporary FDA detention hold on certain avocado imports, managed the now-concluded Foreign Corrupt Practices Act (FCPA) investigation, and managed the Strategic Review process originally announced in June 2025, all while also navigating a global avocado supply that increasingly pressured avocado pricing as the year progressed." B. John Lindeman, President and CEO.
• "Despite these challenges, our team executed with discipline across sourcing, operations, and cost management enabling us to deliver Adjusted EBITDA of $40.8 million, up nearly 12% year over year, and Adjusted Net Income of $28.9 million, up 42%." B. John Lindeman, President and CEO.

Industry Context

The strategic combination with Mission Produce, Inc. positions the combined entity as a vertically integrated global leader in the fresh avocado and produce sector. This merger aims to enhance sourcing security, expand the year-round portfolio across complementary fresh produce categories, and leverage increased industry avocado volumes. The industry currently faces challenges from strong avocado supply and resulting pricing pressures, which the combined scale and efficiencies are intended to mitigate.

Legal Proceedings

• The now-concluded Foreign Corrupt Practices Act (FCPA) investigation.
• Ongoing proceedings with the Mexican Tax Administration Service (SAT), including the recovery of value added tax (IVA) receivables, the 2013 assessment, and legal and advisory services connected to the recent court recognition of Calavo de México as a maquila.
• Potential litigation related to the proposed transaction with Mission Produce.

Stakeholder Impact

• Shareholders: Will receive $27.00 per share (cash and Mission stock), offering a premium and the opportunity to participate in the growth and value creation of the combined company.
• Customers: Expected to benefit from a larger global platform, expanded year-round portfolio, and enhanced ability to invest, innovate, and serve the market at scale.
• Employees: Potential for integration challenges and changes in roles within the combined company.
• Growers: Mission Produce shares Calavo's commitment to quality and consistency for growers.

Next Steps

• Obtain regulatory approvals for the strategic combination with Mission Produce.
• Obtain approval of Mission Produce's common stockholders and Calavo Growers' common shareholders for the merger.
• Close the transaction by the end of August 2026.
• Host a joint conference call with Mission Produce to discuss the proposed transaction.
• File a joint proxy statement with the SEC and a registration statement on Form S-4.
• Leverage an anticipated increase in industry avocado volumes to drive throughput in the Fresh segment.
• Remain focused on scaling the Prepared business to deliver meaningful margin expansion through operating efficiencies.

Key Dates

Recommendation

The definitive merger agreement with Mission Produce offers Calavo shareholders a compelling value of $27.00 per share, representing a significant premium, and the opportunity to participate in the growth of a larger, vertically integrated global leader in the avocado and fresh produce sector. The combined entity is expected to realize $25 million in cost synergies and benefit from enhanced sourcing security and an expanded portfolio. While the company faced operational challenges in FY2025, leading to decreased net sales, it demonstrated strong growth in key profitability metrics (Net Income, Adjusted Net Income, Adjusted EBITDA), indicating effective cost management and operational discipline. The strategic benefits of the merger are substantial and position the combined company for long-term value creation.

Keywords

Calavo Growers, Mission Produce, Merger Agreement, Acquisition, Financial Results, Avocados, Fresh Produce, Guacamole, Adjusted EBITDA, Net Income, Sales, Corporate Governance, Strategic Review, SEC Filing, 8-K