425: Calavo Growers to Merge with Mission Produce, Reports FY25

Calavo Growers announced a definitive agreement to be acquired by Mission Produce in a cash and stock transaction, alongside reporting mixed financial results for fiscal year 2025.

Summary

• Calavo Growers, Inc. (CVGW) will be acquired by Mission Produce, Inc. in a cash and stock transaction, valuing Calavo shares at $27.00 each.
• The transaction is expected to close by the end of August 2026, subject to customary closing conditions, including regulatory and shareholder approvals.
• For the full fiscal year 2025, net income from continuing operations increased by 192% to $20.0 million, and Adjusted Net Income rose 42% to $28.9 million.
• 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, compared to $661.5 million in the prior year.
• Fourth quarter 2025 total net sales decreased to $124.7 million from $170.0 million in the prior year, with Adjusted EBITDA down 24% to $5.0 million.
• The merger aims to establish a vertically integrated platform with sourcing security, an expanded year-round portfolio, and expected cost synergies of $25 million.

Sentiment

Score: 7

Explanation: The announcement of a strategic merger with Mission Produce, offering Calavo shareholders a premium and participation in a larger combined entity, is a significant positive. While Q4 2025 financial results showed revenue declines and a decrease in Adjusted EBITDA, the full fiscal year 2025 demonstrated strong growth in Adjusted Net Income (+42%) and Adjusted EBITDA (+12%), indicating effective cost management and operational improvements despite market challenges. The Q1 2026 outlook is softer, but the long-term strategic move outweighs short-term fluctuations.

Positives

• Net income from continuing operations for fiscal year 2025 increased 192% to $20.0 million, compared to $6.8 million in fiscal year 2024.
• Adjusted net income from continuing operations for fiscal year 2025 increased 42% to $28.9 million, or $1.62 per diluted share, compared to $20.4 million, or $1.14 per diluted share in fiscal year 2024.
• Adjusted EBITDA from continuing operations for fiscal year 2025 increased 12% to $40.8 million, compared to $36.5 million in fiscal year 2024.
• Selling, general, and administrative (SG&A) expenses for fiscal year 2025 decreased 16% to $42.1 million, reflecting lower professional and consulting fees, headcount-related costs, stock-based compensation, and facility costs.
• Prepared segment sales for fiscal year 2025 increased 12% to $71.9 million, driven by higher volumes, expanded programs with key customers, and new customer wins.
• Prepared segment gross profit for fiscal year 2025 increased 38% to $17.4 million, primarily due to higher sales volumes, modestly higher pricing, lower fruit input costs, and improved operating efficiencies.
• Net income from continuing operations for the fourth quarter 2025 was $3.8 million, compared to a loss of $(2.5) million in the prior year quarter.
• Adjusted net income from continuing operations for the fourth quarter 2025 increased 301% to $4.5 million, or $0.25 per diluted share, compared to $1.1 million, or $0.06 per diluted share in the prior year quarter.
• SG&A expenses for the fourth quarter 2025 decreased 6% to $12.3 million, reflecting lower professional and consulting fees (including reduced FCPA-related legal expenses), as well as lower IT and facility costs.
• Prepared segment sales for the fourth quarter 2025 increased 20% to $18.4 million, primarily due to an 11% increase in sales volume, new customers, and new products.
• Prepared segment gross profit for the fourth quarter 2025 increased 100% to $4.0 million, reflecting higher volumes, improved fruit input costs, and improved operating leverage.
• The strategic combination with Mission Produce, Inc. is expected to create $25 million in cost synergies.
• Ended the fourth quarter with cash and cash equivalents of $61.2 million and $97.1 million in available liquidity, with no borrowings under the credit facility.

Negatives

• Total net sales for fiscal year 2025 decreased to $648.4 million from $661.5 million in the prior year.
• Gross profit for fiscal year 2025 decreased to $63.7 million from $67.8 million in the prior year, impacted by $6.1 million of non-recurring costs.
• Fresh segment sales for fiscal year 2025 were down 4% to $576.5 million, driven primarily by lower avocado and tomato volumes.
• Fresh segment gross profit for fiscal year 2025 decreased 16% to $46.3 million, reflecting lower avocado and tomato volumes, a temporary FDA detention hold, and pricing pressure.
• Total net sales for the fourth quarter 2025 decreased to $124.7 million from $170.0 million in the prior year quarter.
• Gross profit for the fourth quarter 2025 decreased to $11.6 million from $16.3 million in the prior year quarter, impacted by $1.0 million of non-recurring costs.
• Adjusted EBITDA from continuing operations for the fourth quarter 2025 decreased 24% to $5.0 million, compared to $6.6 million in the prior year quarter.
• Fresh segment sales for the fourth quarter 2025 decreased 31% to $106.3 million, reflecting a 19% decline in combined average price per carton and a 5% decrease in total cartons sold, primarily due to avocado pricing and volume declines.
• Fresh segment gross profit for the fourth quarter 2025 decreased 46% to $7.7 million, reflecting lower average selling prices and volumes, along with approximately $0.9 million of discrete costs associated with a temporary FDA detention hold on certain avocado imports from Mexico.
• The company expects softer first quarter 2026 results compared to the same quarter in the prior year, primarily due to continued strong avocado supply and resulting pricing dynamics.

Risks

• The ability to obtain the requisite Calavo and Mission stockholder approvals for the proposed transaction.
• The risk that Calavo or Mission may be unable to obtain governmental and regulatory approvals required for the proposed transaction, or that such approvals may result in the imposition of conditions that could adversely affect the combined company or the expected benefits.
• The risk that an event, change, or other circumstance could give rise to the termination of the proposed transaction.
• The risk that a condition to closing of the proposed transaction may not be satisfied.
• The risk of delays in completing the proposed transaction.
• The risk that the businesses will not be integrated successfully or that the integration will be more costly or difficult than expected.
• The 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.
• The 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.
• The risk of litigation related to the proposed transaction.
• The risk that the credit ratings of the combined company or its subsidiaries may be different from what the companies expect.
• The diversion of management time from ongoing business operations and opportunities as a result of the proposed transaction.
• The 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 spending from Calavo or Mission clients, a slowdown in payments by such clients.
• Risks related to each company's ability to attract new clients and retain existing clients.
• Changes in client advertising, marketing, and corporate communications requirements.
• Failure to manage potential conflicts of interest between or among clients of each company.
• The ability of our management team to work together successfully.
• The impact of weather on market conditions.
• Seasonality of our business.
• Sensitivity of our business to changes in market prices of avocados and other agricultural products and other raw materials including fuel, packaging and paper.
• Changes or actions associated with USDA-APHIS and the Mexican Secretary of Agriculture, Secretariat of Agriculture and Rural Development (SADER) phytosanitary regulations.
• Potential disruptions to our supply chain.
• Risks associated with potential future acquisitions, including integration.
• Potential exposure to data breaches and other cyber-attacks on our systems or those of our suppliers or customers.
• Dependence on large customers.
• Dependence on key personnel and access to labor necessary for us to render services.
• Susceptibility to wage inflation.
• Potential for labor disputes.
• Reliance on co-packers for a portion of our production needs.
• Competitive pressures, including from foreign growers.
• Risks of recalls and food-related injuries to our customers.
• Changing consumer preferences.
• The impact of environmental regulations, including those related to climate change.
• Risks associated with the environment and climate change, especially as they may affect our sources of supply.
• Our ability to develop and transition new products and services and enhance existing products and services to meet customer needs.
• Risks associated with doing business internationally (including possible non-compliance with U.S. and foreign laws, restrictive governmental actions, and currency fluctuations).
• Risks associated with receivables from, loans to and/or equity investments in unconsolidated entities.
• Volatility in the value of our common stock.
• The impact of macroeconomic trends and events.
• The effects of increased interest rates on our cost of borrowing and consumer purchasing behavior.
• The resolution of pending internal and external investigations, legal claims and tax disputes, including an assessment imposed by the Mexican Tax Administrative Service (SAT) and our defenses against collection activities.
• Our 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.

Future Outlook

For the first quarter of fiscal 2026, the company expects higher avocado sales volumes, lower average selling prices, and lower per unit profit in the Fresh segment. The Prepared segment is anticipated to see volume-driven sales growth and higher gross profit. Overall, lower Adjusted EBITDA is expected, primarily due to pricing dynamics in the Fresh segment.

Management Comments

• "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 Chief Executive Officer.
• "Mission Produce shares our values and our commitment to quality and consistency for customers and growers alike. By joining a larger global platform, we will be better positioned to invest, innovate, and serve the market at scale." B. John Lindeman, President and Chief Executive Officer.
• "I'm proud of our team's performance in the face of several unanticipated challenges in fiscal year 2025, including a temporary facility shutdown, an FDA detention hold, the concluded FCPA investigation, and navigating global avocado supply pressures." B. John Lindeman, President and Chief Executive Officer.
• "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 Chief Executive Officer.
• "Looking ahead to 2026, while we have experienced sequential monthly improvement since October, we still expect softer first quarter results as compared to the same quarter in the prior year, primarily due to continued strong avocado supply and the resulting pricing dynamics." B. John Lindeman, President and Chief Executive Officer.
• "We are well positioned to leverage an anticipated increase in industry avocado volumes to drive throughput in our Fresh segment. Simultaneously, we remain focused on scaling our Prepared business, which continues to deliver meaningful margin expansion through operating efficiencies." B. John Lindeman, President and Chief Executive Officer.

Industry Context

The announced merger with Mission Produce signifies a major consolidation within the fresh avocado and produce industry, aiming to create a vertically integrated global leader. This move comes as the industry faces challenges such as fluctuating avocado supply and pricing pressures, as well as regulatory hurdles. The combined entity is positioned to leverage scale for sourcing security, expanded product portfolios, and cost efficiencies, potentially setting a new benchmark for operational integration in the sector.

Legal Proceedings

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

Stakeholder Impact

• Shareholders: Calavo shareholders will receive $27.00 per share ($14.85 cash + 0.9790 shares of Mission), representing a premium and an opportunity to participate in the growth of a larger combined company. Mission shareholders are expected to own approximately 80.3% of the combined company.
• Employees: The merger creates a larger global platform, potentially offering new opportunities but also carries risks of integration difficulties and adverse reactions to business or employee relationships.
• Customers: The combined company aims to offer a vertically integrated platform with sourcing security and an expanded year-round portfolio across complementary fresh produce categories, potentially leading to better service and product availability.
• Growers: The combined entity will be a global leader in sourcing, potentially impacting grower relationships and market dynamics.
• Creditors: The credit ratings of the combined company or its subsidiaries may differ from expectations, which could impact creditors.

Next Steps

• Obtain requisite Calavo and Mission stockholder approvals for the merger.
• Obtain governmental and regulatory approvals for the merger.
• Close the strategic combination with Mission Produce, Inc. by the end of August 2026.
• Leverage anticipated increase in industry avocado volumes to drive throughput in the Fresh segment.
• Continue focusing on scaling the Prepared business to deliver margin expansion through operating efficiencies.
• Mission and Calavo will host a joint conference call on January 14, 2026, at 4:30 p.m. EST to discuss the proposed transaction.

Key Dates

Recommendation

The strategic combination with Mission Produce is a transformative event for Calavo Growers, offering a significant premium to current shareholders and the opportunity to participate in a larger, more diversified, and vertically integrated global leader in the avocado and fresh produce market. The expected $25 million in cost synergies and expanded market reach present substantial long-term value creation potential. While recent quarterly results show some headwinds, the full fiscal year demonstrated strong adjusted profitability growth, indicating operational resilience. The merger provides a clear path to enhanced shareholder value and market leadership, making it an attractive investment.

Keywords

Calavo Growers, Mission Produce, Merger, Acquisition, Avocados, Financial Results, FY 2025, Net Income, Adjusted EBITDA, Fresh Produce, Agriculture, Food Processing, Corporate Governance, SEC Filing, CVGW, Nasdaq