Please note this call is being recorded and that we are standing by if you should need any assistance. It is now my pleasure to turn the meeting over Kami Forzalini, Managing Director, FGS Global.
Good afternoon, everyone, and thank you for joining us on such short notice to discuss Mission's announcement that it has entered into a definitive agreement to acquire Calavo. This afternoon, Mission and Calavo issued a news release regarding this announcement and have posted a presentation that we will reference during this call. The press release and presentation are available online under the Investor Relations section of the company's respective websites. The comments during today's call and the accompanying presentation contain forward-looking statements with the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements other than the statements of historical facts are considered forward-looking statements. These statements are based on management's current expectations and beliefs, as well as a number of assumptions concerning future events.
Such forward-looking statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from the results discussed in the forward-looking statements. Some of these risks and uncertainties are identified and discussed in the company's filing with the SEC. We'll also refer to certain non-GAAP financial measures today. Please refer to the tables included in the press release, which can be found on the company's Investor Relations website, for reconciliation of non-GAAP financial measures to the more directly comparable GAAP measure. On today's call are Steve Barnard, CEO of Mission; John Pawlowski, President and COO of Mission; and John Lindeman, Calavo's President and CEO. For today's call, we will have prepared remarks followed by a Q&A. With that, I'd like to turn the call over to Steve.
Thanks, and thank all of you for joining us today. Earlier today, we announced a definitive agreement to acquire Calavo, a leading provider of fresh avocados, tomatoes, papayas, and value-added prepared foods. We believe this marks an important milestone not only for Mission but for the industry as a whole. We've admired Calavo, our longtime neighbors and respected leader in the global avocado market for decades now. We're excited, excuse me, we're excited about what we can achieve with the addition of Calavo, and we are focused on building a stronger, more diversified company positioned for long-term sustainable growth. With that, I'll turn the call over to John.
Thank you, Steve, and good afternoon, everyone. Following along on the deck, I'm on slide three, and what we'll achieve with the Calavo acquisition. For over four decades, Mission has been a global leader in sourcing, producing, and distributing fresh avocados, supported by a fully integrated operating model and a scaled global distribution network across North America, Europe, the U.K., and Asia. We have a strong foundation, which will become even stronger with the addition of Calavo. Calavo brings more than a 100-year heritage as the original North American avocado company and a trusted name in both fresh and prepared foods. In addition to strong avocado operations, Calavo brings an attractive prepared foods platform, including guacamole, salsas, and dips, along with flexible go-to-market capabilities across branded, private label, and store brands.
Turning to slide four, strategically, this acquisition will strengthen Mission's position in the North American avocado and fresh produce market while accelerating international expansion through scale and sourcing optionality. It also meaningfully diversifies the business, expanding Mission's product portfolio into prepared foods, tomatoes, and papayas. Importantly, the two businesses are highly complementary. Mission brings scale, infrastructure, and global distribution, while Calavo brings strong customer relationships, brand equity, and prepared foods capabilities. The addition of Calavo will create a fully integrated model that improves reliability, strengthens sourcing security, and allows us to operate more efficiently across seasons. We expect significant value creation driven by operational synergies and Mission's proven track record of execution. On a pro forma basis, in fiscal 2025, the combined company would have generated approximately $2 billion in net sales and $176 million in adjusted EBITDA.
Overall, this transaction positions Mission to operate with greater scale, broader capabilities, and a more diversified business model, creating a strong foundation for sustained value creation. I'll now turn to slide five to discuss an overview of the transaction. We have entered into a definitive agreement to acquire Calavo Growers in a cash and stock transaction. Calavo shareholders will receive $27 per share, comprised of $14.85 in cash, and 0.9790 shares of Mission for each Calavo share. Upon close, based on shares currently outstanding, Mission shareholders are expected to own approximately 80.3% of the combined company, with Calavo shareholders owning approximately 19.7%. Following the close of the transaction, I will serve as CEO of the combined company, and Steve will serve as executive chairman.
Both companies' boards of directors have approved the transaction, which is expected to close by the end of August 2026, subject to customary regulatory and shareholder approvals. Now that we've covered the transaction details, let's zoom out a bit and look at what this acquisition means and the value it creates. I touched on several of these points earlier, but I'd like to reiterate the core pillars of the strategic rationale that are outlined on slide six. Number one, creating a more diversified year-round fresh produce portfolio. Second, building a scaled North American platform with global reach, then strengthening vertical integration across our value chain, also expanding into the high-growth prepared foods category, and finally, maintaining our strong financial profile. On slide seven, we delve a bit deeper into the benefits the diversified year-round avocado and fresh produce portfolio provides.
The addition of Calavo is expected to create a scaled North American avocado and fresh produce platform well-positioned to expand internationally. Adding Calavo will accelerate Mission's business model diversification by expanding its presence in the high-growth prepared foods segment. Previously, as discussed on many of our calls, we have expanded into the produce categories, including mangoes and blueberries, and Calavo's tomato and papaya offering will further diversify our produce portfolio and add year-round reliability across seasonal troughs in the avocado space. In addition, the combination of both companies' grower networks positions Mission to enhance supply reliability and sourcing security. Moving to slide eight, you can see that through this transaction, we will bolster our premier avocado and fresh produce platform in North America and accelerate global reach with new capabilities as outlined on the slide.
The addition of Calavo to our network will build our leading position, most notably by expanding our presence in Mexico and California. Calavo has two packing houses in Michoacán and Jalisco, which will expand Mission's network to four packing houses in Mexico, increasing our access to high-quality fruit from the country that serves as the number one source of avocados in the U.S. market. This expanded footprint, key hubs, and robust global distribution network will position the new company to provide a more consistent year-round supply with improved fill rates, ripening programs, and logistics optionality, supporting continued growth across our global customer base. Turning to slide nine, already at Mission, we bring a vertically integrated platform spanning farming and growing operations.
Together with Calavo's complementary value-added prepared foods capabilities and the combined marketing and distribution capabilities of two companies, this acquisition ensures Mission is one of the few scaled end-to-end platforms capable of serving retail, wholesale, and food service customers globally through our vertically integrated platform. Slide 10. Finally, we have outlined another key benefit of this acquisition, which is the entry into prepared foods. Calavo brings a portfolio of brand name and private label guacamole, salsas, and plant-based dips that are sold to grocery retailers and food service providers. This is a highly attractive category, and we're excited to play in it. There is clear consumer demand for fresh, convenient, and better-for-you options. The total addressable market for this segment is approximately $1.7 billion, and it is growing in the high single digits. Our strength will support the impressive performance Calavo has generated in this category.
Together, we are poised to win. Mission brings a complementary supply chain to support the distribution of these products, as we have strong innovation capabilities that will also help meet consumer demand and different use applications. This segment has strong opportunities for growth, and we are excited about the future upside ahead. Turning to the financial rationale and structure of the acquisition, on slide 11, I'll cover synergies. We have identified $25 million of annualized cost synergies within 18 months post-close, with meaningful upside potential. These synergies are expected to drive meaningful EBITDA growth and cash flow generation. Cost synergies will be driven by streamlining the organization, scaling operational efficiencies through optimizing the distribution center network, improving freight and packaging costs, and leveraging best practices in sourcing. We see additional upside potential from revenue synergies and further efficiencies enabled by best-in-class operational leadership of the combined organization.
We view these synergies as highly actionable. We have outlined a clear timetable to achieve them, primarily driven by operational integration and supported by a best-in-class management team. We're confident we have the right people with the right experience to execute seamless and smooth integration to action these synergies. Next, on slide 12, I'd like to walk through the combined financial profile. The acquisition of Calavo significantly enhances our scale, expands our leadership position, and creates additional attractive growth opportunities. Today, Mission delivers approximately $1.4 billion in revenue. With Calavo, we will add approximately $648 million in revenue. On a pro forma basis and inclusive of synergies, we expect to generate revenue north of $2 billion, with a combined EBITDA of approximately $176 million and adjusted EBITDA margin of 8.6%.
At Mission, we've been laser-focused on driving enhanced free cash flow, and we expect to maintain our strong cash flow generation with this acquisition. We will have a net leverage ratio of approximately 2.4 post the transaction. Overall, we'll benefit from an expanded platform with significant scale and a very robust financial foundation, creating additional optionality for future investments to continue to drive growth. Turning to slide 13, the acquisition of Calavo turbocharges our strategy to drive strength, to drive growth. It fits perfectly with our existing initiatives to capitalize on strong growth trends in our core U.S. market, leverage our platform to develop internationally, and to diversify sourcing to enhance our leading position. We've been vocal about the strong runway for growth we see in North America, including the opportunity to continue to grow our position, and this acquisition does just that.
Overall, the strategic fit here is undeniable, and we're incredibly excited about future opportunities for our business with the addition of Calavo and the Calavo team. Speaking of the Calavo team, before we wrap, I'd like to turn it over to John Lindeman to say a few words.
Thank you, John. Hello, everyone. Let me begin by saying that at Calavo, we're very proud of our over 100-year legacy and the key role our company played in putting avocados on the map as a growing superfood category. Over time, our tremendous team has built the company into one of the leading global players in sourcing and distribution of avocados, tomatoes, and papayas, and in producing top-quality guacamole and other prepared foods. We see significant opportunity ahead that could be realized with the right partner, and we believe this strategic combination with Mission represents an exciting next chapter for our stakeholders. We are confident that by joining Mission, we'll be able to unlock growth opportunities and expand the impact of our trusted Calavo brand. We also expect that with our combined scale, we'll have greater ability to invest, innovate, and serve customers across an even broader geographic area.
We also believe this strategic combination is in the best interest of our shareholders. Thanks to the structure of the transaction, with approximately 45% of the consideration coming in the form of stock at the combined company, Calavo's shareholders have the opportunity to participate meaningfully in the significant value creation opportunity that the larger combined company now represents. Finally, I want to express a sincere thank you to all the tremendous Calavo employees who have in the past and will continue to do great things for the new combined company. With that, back to you, John.
Thank you so much, John. Before we open the line for questions, I'd also like to take a moment to recognize the incredible employees at both Mission and Calavo. Your hard work and dedication are what make it possible to deliver healthy, high-quality avocados and fresh produce to consumers every day. I've personally been in this space now and running with this company for the last two years, and have to say it is the best group of people, and the industry shows and getting to meet the Calavo team. I'm so excited to work with all of you. It really is an incredible place and space to be in, and excited to see how this all works out together. We're deeply grateful for all your commitment, and we're excited about this next chapter. With that, we'll open the line for questions.
Thank you. If you would like to ask a question, please press *1 on your keypad. To leave the queue at any time, press *2. Once again, that is *1 to ask a question, and we'll pause for just a moment to allow everyone a chance to join the queue. Our first question will come from Mark Smith with Lake Street. Please go ahead.
Hi, guys. I was curious if you could give us any more insight just onto reduced risk as we think about kind of geographic and product exposures in this combined entity.
I don't see any added exposures. It's just more of the same, with the exception of for us, the processing deal is a little bit different, although we've been in it in the past, so we're familiar with it. But no, I just think it's a very positive move. Can sell more product to more customers globally and have the right team to do it.
Yeah. Mark, this is John, and the way I would kind of add on to that for Steve is we've spent a lot of time and talked a lot about it on our earnings calls over the course of the last really 18 months on how we really pride ourselves and focus on understanding the dynamics between the different countries of origin and being able to ensure that we're moving product to the right place at the right price at the right time, and having the additional optionality in regards to the scale in the different locations that the Calavo entity brings together really takes the best of what we've been able to do by optionality out those countries of origin and providing us the opportunity to do it at a different scale.
So that means that when we have customer programs that in the past we may not have been able to fulfill, we'll be able to dynamically pivot and move to be able to fulfill those customer programs, whether they're here in the U.S. or they're in Europe or they're somewhere else, and in ways that we just haven't been able to do in the past because of that scale and the ability to move product through the existing locations that we're already in.
Perfect. In the other one for me, it may be early to talk about this, but just curious around consolidation opportunities, especially as we think about packing houses, or is there ample business to continue running each of the ones that you have and that will be acquired?
Yeah. This is an interesting year. There's a lot of fruit coming in. Mexico, we're in one of pretty much the highest seasons in the last five, six years of how much fruit is coming in from Mexico right now. And as we look out into the future, we see opportunities to, I'd say, optimize our network because there are some complementary locations within the United States where we're in similar spots. But as far as the sourcing in particular, we really do think that there's an opportunity to leverage the scale that bringing these two organizations together makes by continuing to operate those facilities in a way that effectively utilizes their capacity.
Great. Thank you, guys.
Thank you. Our next question will come from Pooran Sharma with Stephens.
Great. Thanks for the question, and congrats on the news. Very exciting. Maybe just to start out, wanted to understand the synergy, cost synergy realization of $25 million. You mentioned that there's some upside potential here. Just wondering if you could give a little bit more granularity regarding that upside potential. And then regarding revenue synergies, are you able to give us a sense as to the magnitude, either quantitatively or qualitatively, in regards to the revenue synergies? Thank you.
Yeah, so on the operational synergies, I think the way we wrote things were $25 million and meaningful upside. We spent a lot of time along with the Calavo leadership team and some of our folks here analyzing the operational network, how we think about our lanes from a freight capacity perspective, freight management perspective, and came up with a number that we feel really confident in being able to materialize over the course of the next 18 months. Now, within that, there were some assumptions we made around how scale effectively allows us to operationalize some of our buying practices, some of our packaging supply practices, etc., that we felt like we went a little conservative on in regards to how we could execute against those, particularly in environments where it's either more competitive or less competitive to acquire fruit.
So we think that there's. I think meaningful is a really good word for you there, Farha, that we feel really strong about the 25, and we're going to stretch ourselves to push meaningful to be a really interesting and enticing number over the course of the next 18 months. Now, what was your second question? I can't remember exactly what you said. Yeah.
Was just wondering if we could get a little bit more granularity regarding revenue synergies, and qualitatively or quantitatively would be helpful?
I mean, I think that's a tough one, right? Because what you're talking about there is you're bringing two of the premier organizations together that are purveyors of fresh avocados across multiple geographies, and we share a lot of the similar customers, but we also don't share a lot of customers, right, and there's going to be an opportunity, or there'll be both situations where the combined organization is not given an opportunity to fulfill a meaningful amount of fruit for a small handful number of customers.
But ultimately, we think that when you take the marketing capabilities of both Mission and Calavo, and you take the new sourcing strength between the two organizations, the ability for us to deliver against 52-week programs, year in and year out, optimize pricing strategies and promotional strategies for customers, it's going to net in a gain in regards to overall commercial opportunity for us. So not to put a number on it for you, I know you'd like me to do that, but theoretically, we're bringing the best of the best together, and the opportunity to continue to grow within our customer framework, we feel very strongly about.
With consumption continuing to grow as is production. So timing's good.
John, if I can just add something too.
Yeah, sure.
From the Calavo side, look, I think Mission probably has historically a little bit more international presence than do we here on the Calavo side. And so certainly on the fresh avocado side, they've got that well covered, and our sourcing will be incremental to theirs. But in addition to that, on our prepared guac and salsas and dips side, they provide an opportunity for additional outlets in geographic areas where we're underrepresented. And so really great opportunity on that front for us.
Yeah. And that's a great point, John. And one other point, Pooran, sorry. We've talked a lot over the last year and a half about the opportunities that being in the mango space has given to us, right? We definitely went down that road thinking there it would create optionality in regards to our ability to sell into existing customers on the mango side. And what we saw was, and we've shared, was we've had customers that we've started on the mango side, and that's actually brought us in on the avocado side. So having a broader basket allows us to expand the way we think about engaging with consumers in a way that we haven't sorry, customers in a way that we haven't been able to in the past. We believe that also brings additional optionality to expand both reach and share.
Thank you. As a reminder, that is *1 to ask a question. All right. We do have a follow-up question from Pooran Sharma with Stephens.
Appreciate it there. I just wanted to get one more in. I think John, John Lindeman, John, you were kind of alluding to it. I wanted to better understand maybe your opportunity or ability to scale the prepared foods, the guac business, given your now combined platform is much bigger than what you previously had. And I know you kind of gave us some details there, John. I was just looking to see if we could just get a tad bit more granularity.
Yeah, sure. I'm probably not going to give you any quantitative answers to it, but I can certainly add a lot of color. I mean, our prepared segment has really been a nice growth engine inside of Calavo. And frankly, we believe this year could be a really promising year for that segment specifically. In 2025, we added several new customers to that side of the business. We introduced some new products, which are really gaining share. And frankly, although we don't have the geographic expansion that the Mission has, we've actually had some success internationally with promoting and developing some new customers overseas in this particular category. So we're really excited. I think what Mission brings on top of what our team here has already generated, pretty significant volume growth opportunity for us over the coming year.
I think Mission also brings us the ability to continue to invest and support that business with confidence. As we are driving more throughput through the business, it's creating more pressure on our infrastructure, and we've got opportunity to support that more aggressively behind Mission. And I have no doubt that our joint sales forces will find new opportunities for our innovative products and, frankly, great quality products. So I think our team is really excited about it.
Great. Thank you very much.
Thank you, ladies and gentlemen. This does conclude the Q&A portion of today's call and brings us to the end of today's meeting. We appreciate your time and participation, and you may now disconnect.