What Happened?
Shares of avocado company Mission Produce (NASDAQ: AVO) jumped 4.8% in the afternoon session after the company agreed to acquire Calavo Growers in a cash-and-stock deal valued at roughly $430 million. Analysts viewed the deal as strategically attractive because it was expected to expand Mission's scale in North American avocados, broaden its customer base, and quicken its diversification into prepared foods.
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What Is The Market Telling Us
Mission Produce’s shares are not very volatile and have only had 6 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.
The previous big move we wrote about was 7 days ago when the stock dropped 5.4% on the news that the company agreed to acquire Calavo Growers (CVGW) in a cash-and-stock transaction valued at approximately $430 million.
Under the terms of the deal, Calavo shareholders were set to receive $27.00 per share, a figure that represented a 26% premium to Calavo's 30-day volume-weighted average price. The payment structure included $14.85 in cash and 0.9790 shares of Mission Produce for each share of Calavo. It is common for the stock of an acquiring company to fall after such an announcement, especially when it involves paying a premium and issuing new shares, which can dilute the value for existing shareholders. Upon the deal's closing, Mission Produce shareholders were expected to own approximately 80.3% of the combined entity.
Mission Produce is up 19.3% since the beginning of the year, and at $13.81 per share, has set a new 52-week high. Investors who bought $1,000 worth of Mission Produce’s shares 5 years ago would now be looking at an investment worth $852.59.
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