Calavo Growers Evaluating Potential Sale of Its Fresh Cut Business (formerly “RFG”); Declares Quarterly Dividend

Rhea-AI Summary

Calavo Growers, Inc. (Nasdaq: CVGW) announced the exploration of a sale of its Fresh Cut Business to F&S Fresh Foods, with a total transaction value of approximately $100 million. The company aims to focus on its core avocado and guacamole businesses to maximize profitability. The transaction is expected to result in a significant reduction to Calavo's post-transaction SG&A, with the closing anticipated in the second fiscal quarter of 2024. The expected use of proceeds includes debt reduction, growing the core business, and returning cash to shareholders. The Board of Directors also declared a quarterly cash dividend of $0.10 per share, to be paid on January 31, 2024.

Positive

• Exploration of sale of Fresh Cut Business to F&S Fresh Foods
• Focus on core avocado and guacamole businesses
• Total transaction value of approximately $100 million
• Significant reduction to Calavo's post-transaction SG&A
• Transaction closing anticipated in second fiscal quarter of 2024
• Expected use of proceeds includes debt reduction, growing core business, and returning cash to shareholders
• Quarterly cash dividend declared by the Board of Directors

Negative

• None.

Market Research Analyst

The announcement by Calavo Growers, Inc. regarding the potential sale of its Fresh Cut Business to F&S Fresh Foods signifies a strategic refocusing on its core avocado and guacamole businesses. This move, if finalized, could streamline operations and potentially improve profitability by shedding a non-core segment. The decision to divest comes at a time when many companies are reassessing their portfolios to concentrate on areas with the highest return on investment.

The estimated transaction value of approximately $100 million, alongside the anticipated reduction in SG&A (Selling, General and Administrative expenses), suggests a significant restructuring of Calavo's financials. For shareholders, the proposed use of proceeds for debt reduction and returning cash is a positive signal, indicating a commitment to financial health and shareholder value.

The timing of the transaction, expected to close in the second fiscal quarter of 2024, may affect short-term stock performance as investors assess the potential impact on the company's market position and financial stability. The divestiture of the Fresh Cut Business could also alter competitive dynamics within the industry, potentially benefiting F&S Fresh Foods with an expanded portfolio and market share.

Financial Analyst

The declaration of a quarterly cash dividend of $0.10 per share is a clear indication of Calavo Growers' confidence in its financial position and its commitment to providing shareholder returns. Dividends are often a reflection of a company's stability and profitability and maintaining or increasing dividend payouts can be seen as a positive sign to investors.

However, it is crucial to analyze the sustainability of such dividends in the context of the company's overall financial health. Investors should closely monitor the company's earnings reports and cash flow statements following the sale to ensure that the dividend payments are supported by actual performance and are not merely a short-term incentive.

It is also important to consider the impact of the transaction on the company's balance sheet. A reduction in debt levels can lead to lower interest expenses and an improved debt-to-equity ratio, which are key financial metrics that can influence investor sentiment and the company's creditworthiness.

Legal Expert

The non-binding letter of intent between Calavo Growers and F&S Fresh Foods is an initial step in the negotiation process and does not guarantee the completion of the sale. This stage involves due diligence and the negotiation of terms that could significantly influence the final transaction details. Investors should remain aware that until a definitive agreement is reached, the proposed transaction is subject to change.

Legal complexities arising from the sale of business units, especially when real estate is involved, require careful scrutiny to ensure compliance with regulatory requirements and to address any potential risks associated with the transfer of assets and liabilities. The final terms of the agreement will be critical in evaluating the legal and financial implications for both Calavo Growers and F&S Fresh Foods.

Investors should also be attentive to any disclosures or regulatory filings that follow, as these will provide more concrete information regarding the structure of the deal and its compliance with industry norms and legal standards.

SANTA PAULA, Calif., Jan. 16, 2024 (GLOBE NEWSWIRE) -- Calavo Growers, Inc. (Nasdaq: CVGW), a global avocado-industry leader and provider of convenient, ready-to-eat fresh food, today announced that it is exploring a sale of its Fresh Cut Business (formerly “RFG”) to F&S Fresh Foods.

“Since I returned to Calavo as CEO in March, we have renewed our focus on our core avocado and guacamole businesses to maximize profitability, and I am pleased with the progress we have made,” said Lee E. Cole, President and Chief Executive Officer of Calavo Growers, Inc. "To dedicate more focus to our core and to maximize shareholder value, we have been exploring strategic alternatives for our Fresh Cut business, previously known as RFG. I am pleased to share that we have signed a non-binding letter of intent to evaluate a sale of our Fresh Cut business and some related real estate with F&S Fresh Foods, a leader in the industry and one of our long-trusted co-packing partners.”

Highlights of the contemplated transaction include:

• Total transaction value of approximately $100 million, subject to customary adjustments
• Significant reduction to Calavo’s post-transaction SG&A
• Transaction closing anticipated in second fiscal quarter of 2024
• Expected use of proceeds includes debt reduction, growing our core business and returning cash to shareholders

There can be no assurance that a definitive agreement will result from the discussions with F&S Fresh Foods and terms are still subject to negotiation. The Company will provide more information when and if a definitive agreement is executed.

Dividend
The Company also announced today that its Board of Directors declared a quarterly cash dividend on its common stock of $0.10 per share. The dividend will be paid on January 31, 2024, to Calavo Grower’s shareholders of record as of the close of business on January 26, 2024.

About Calavo Growers, Inc. 
Calavo Growers, Inc. (Nasdaq: CVGW) is a global leader in quality produce, including avocados, tomatoes and papayas, and a pioneer of healthy fresh-cut fruit, vegetables and prepared foods. Calavo products are sold under the trusted Calavo brand name, proprietary sub-brands, private label and store brands. Founded in 1924, Calavo has a rich culture of innovation, sustainable practices and market growth. The company serves retail grocery, foodservice, club stores, mass merchandisers, food distributors and wholesalers worldwide. Calavo is headquartered in Santa Paula, California, with processing plants and packing facilities throughout the U.S. and Mexico. Learn more about The Family of Fresh™ at calavo.com.

Safe Harbor Statement
This press release contains statements relating to future events and results of Calavo that are “forward-looking statements,” as defined in the Private Securities Litigation Reform Act of 1995, that involve risks, uncertainties and assumptions. These statements include statements about the potential sale of the Fresh Cut business and certain related real estate (the “Potential Transaction”), the use of any proceeds from the potential sale and the potential reduction in SG&A expenses. These statements are based on our current expectations and are not promises or guarantees. Risks and uncertainties that may cause actual events and results to be materially different from any events or results expressed or implied by the forward-looking statements include, but are not limited to, the ability of the parties to reach a binding agreement for the Potential Transaction, the potential that the price, structure, form of consideration (for example, cash, promissory, equity) and other material terms may be materially different than currently expected, the continuing financial and operating performance of the Fresh Cut business during the negotiation process, and the proposed purchaser’s willingness and ability to provide the capital and/or financing necessary to complete the transaction. Any transaction will be subject to the satisfaction or waiver of certain closing conditions, including but not limited to, the availability of third-party consents that may be required, the accuracy of each party’s representations and warranties contained in any binding agreement, compliance by each party with its respective covenants contained in any binding agreement, and the potential requirement of a transaction services agreement for continuing services by the Company to the purchaser for a period of time following any closing. Any of these risk and uncertainties, or the failure of any closing conditions, could lead to no transaction being consummated or to any transaction being consummated having less favorable consideration or other terms than currently anticipated. Whether or not the closing occurs, the announcement and pendency of the Potential Transaction may adversely affect the Company’s relationships with customers, vendors or employees and may adversely affect operating results and business generally. If the Potential Transaction is delayed or is not completed for any reason, investor confidence may decline and we may face negative publicity and possible litigation.

For a further discussion of these risks and uncertainties and other risks and uncertainties that we face, please see the risk factors described in our Annual Report on Form 10-K for the fiscal year ended October 31, 2022 and updates contained in subsequent quarterly reports on Form 10-Q filed with the Securities and Exchange Commission, and any subsequent updates that may be contained in our Annual Report on Form 10-K for the fiscal year ended October 31, 2023 and other filings with the Securities and Exchange Commission. Forward-looking statements contained in this press release are made only as of the date of this press release, and we undertake no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise. 

Investor Contact

Julie Kegley, Senior Vice President

Financial Profiles, Inc.

calavo@finprofiles.com

310-622-8246

What is the ticker symbol for Calavo Growers, Inc.?

The ticker symbol for Calavo Growers, Inc. is CVGW.

What is the total transaction value for the sale of the Fresh Cut Business?

The total transaction value is approximately $100 million.

When will the transaction closing be anticipated?

The transaction closing is anticipated in the second fiscal quarter of 2024.

What is the quarterly cash dividend declared by the Board of Directors?

The quarterly cash dividend declared is $0.10 per share, to be paid on January 31, 2024.

What does the expected use of proceeds include?

The expected use of proceeds includes debt reduction, growing the core business, and returning cash to shareholders.