On Friday, Sept. 4, avocado industry leader Mission Produce Inc. announced that it had filed a registration statement with the U.S. Securities and Exchange Commission relating to a proposed initial public offering of its common stock. Application has been made for listing the common stock on the NASDAQ Global Select Market under the symbol “AVO.” The number of shares to be offered and the price range for the proposed offering have not yet been determined.
There are strict regulations governing comments by company officials when embarking on this route, so the press release announcing the move was short and to the point. And the company declined the opportunity to be further interviewed on the subject for the same reason.
However, Senior Director of Marketing and Communications Denise Junqueiro did give The Produce News an additional statement: “We are excited for the potential to be a public company. It’s the next logical step for Mission and our continued growth. As always, Mission will stay committed to our global customer base, employees and partners.”
The press release revealed that BofA Securities, J.P. Morgan and Citigroup are acting as bookrunning managers for the proposed offering. Roth Capital Partners, Stephens Inc. and D.A. Davidson & Co. are acting as co-managers for the proposed offering. The proposed offering will be made only by means of a prospectus. A copy of the preliminary prospectus relating to the proposed offering, when completed, will be available from the financial companies listed above.
The press release contained the following caveat: “A registration statement relating to these securities has been filed with the U.S. Securities and Exchange Commission, but has not yet become effective. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective.”
Mission Produce is a world leader in sourcing, producing and distributing fresh avocados, servicing retail, wholesale and foodservice customers in about 25 countries. The company’s operations consist of four packing facilities in the United States, Mexico and Peru; 11 distribution and ripening centers across the U.S., Canada, China and the Netherlands; and three sales offices in the U.S., China and the Netherlands.
The Produce News did contact several produce industry members for their take on the announcement. Interestingly, the separate interviews produced very similar comments about Mission’s leadership, potential reasons for the action and the not-so-stellar record for produce industry companies that have gone public. Also, each of the three people quoted in this article noted that they have no information about the specifics of the financial situation of Mission or any inside information.
Longtime industry observer Bruce Peterson, who made his mark originally as Walmart’s top produce person and now consults with several clients through Peterson Insights, praised Mission Produce Founder and CEO Steve Barnard. “I do think very highly of Steve Barnard, both as a grower and a businessman. Mission is a fantastic success story and watching the company grow and expand over the years has been fun to watch. It's simply an excellent company.”
But he called the move “as puzzling as it is interesting.” Speculating on the reason for the IPO, Peterson said companies typically go public either to finance their own expansion or to acquire another business. The goal of an IPO is typically to raise significant capital.
“If I had to guess, I would say Mission is probably going on a shopping spree,” he said. “I do not know their financial situation, but they’ve always seemed to be able to finance their own growth.”
Peterson also opined that the business situation caused by the coronavirus pandemic has created some value opportunities in the produce industry as some asset-rich firms are financially stressed.
Another longtime retailer and industry veteran, Dick Spezzano, who runs Spezzano Consulting Service, also voiced his admiration for both Barnard’s and his board of directors’ business acumen before commenting on the effort. He also discounted that idea that the move would be made to finance the company’s own internal expansion. He noted that the company has never had a problem doing that in the past and Mission could have more easily worked with a private equity firm. Spezzano said he is very interested in learning the reason behind the IPO effort.
Al Vangelos was at the helm of Calavo Growers when it transitioned from a co-op to private share ownership in the 1990s, and then was a keen observer when it later transitioned to a public company. He called Barnard a “visionary,” taking Mission from a small packer to one of the largest in the industry. “I always enjoyed competing against him and watching him grow his company.”
He agreed that Mission’s IPO would appear to be a forerunner to expanding through acquisition. But he also said the action “puzzles me” as he said the produce industry does not have a good track record in the stock market. Calavo has done well with its stock trading well above its initial IPO price in 2002. “Calavo success is pretty unique among produce-type companies,” Vangelos said, noting that other produce companies have not done nearly as well.
It is Vangelos’ opinion that technology and pharmaceutical companies drive the stock market and he is not sure an avocado company will be able to attract the huge investors typically necessary for a successful IPO. He added that some produce industry IPOs have initially failed in the past as they have been unable to attract sufficient investors at the outset. He added that the current economic environment does not appear to be especially inviting for such a move.
Spezzano said there are both pros and cons when evaluating going public. He said generating capital is the big plus, but operating as a public company has been difficult for produce companies in the past. “The produce industry does not like to be dictated by Wall Street.”
Wall Street, he said, likes steady year-over-year growth and that is difficult to attain in an industry where outside forces almost always have an outsized impact on sales and price. He also noted that a one-commodity company, such as Mission Produce, has the additional challenge of achieving steady growth without diversification. Of course, the IPO might be the diversification driver.
Peterson made a similar point about the produce industry. “In general, publicly held produce companies have not performed well. The fundamental reason for that is the general unpredictability of agriculture. Many factors can adversely impact a produce company's performance, oftentimes outside of management's ability to control it.”
He said the supply-and-demand curve can quickly change in the industry, very much impacting the profit and loss statement.
“Blueberries are the recent ‘poster child’ for this,” he said, “and I'm not sure I can point to a single publicly held produce company that consistently performs for the shareholder. That's not to say, in any way, that Mission can't perform, it's just that the sector in general doesn't have a good track record.”
Peterson also echoed the comments of the others when he noted, despite the challenges, “I sure wouldn't bet against Steve Barnard.”
