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Dubroff: Mission Produce IPO holds lessons for industry, region

By   /   Thursday, October 1st, 2020  /   No Comments

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UPDATE: Mission Produce began trading on the Nasdaq at 12:16 p.m. on Oct. 1. Follow the stock here.

The window for initial public stock offerings rarely opens as wide as it has in the fall of 2020. That’s remarkable given the COVID-19 pandemic, the election campaign and governments racking up debt like crazy.

Workers process avocados at the Mission Produce packing facility in Oxnard.

But after watching Mission Produce CEO Steve Barnard cleverly build a powerhouse agribusiness, I’m not surprised that he’s taken the opportunity to jump through the IPO window.

Mission is set to begin trading on the Nasdaq on Oct. 1 at a price of $12 per share, below the company’s original expectations of $15 to $17.

I’ve taken some time to look through the company’s filings with the U.S. Securities and Exchange Commission, and here are a few highlights:

• This Oxnard-based company is a really big player in avocados, but there is room for growth. It distributed 558 million pounds in 2019, dwarfing its nearest competitors, which include Santa Paula-based Calavo. Its revenues of $883 million are substantial enough to make it a global leader. But the U.S. avocado industry alone is a $6.4 billion at retail prices.

• Mission Produce has likely been thinking about an IPO for a while. One sign is that it had a really good year in 2019, especially when it comes to operating profits. Its fiscal year ended Oct. 31 showed earnings before taxes, depreciation and interest were $123 million, or roughly three times the $43 million reported a year earlier. Cash grew to $64 million from $28 million a year earlier. All that happened despite modest revenue growth—somebody was paying attention.

• Vertical integration is part of the plan. For decades, Mission has been doing for avocados what Limoneira, based in Santa Paula, has been trying in lemons in recent years. It grows in the U.S., Mexico and Peru and then packs, ships and delivers to customers directly. Size gives it strength and a new, 200,000-square-foot facility in Laredo, Texas will provide efficiencies in getting Mexican product to the U.S. market.

• Barnard has been willing to trade equity for opportunity. One of Mission’s largest shareholders is Luis A. Gonzales, a director, whose family sold its Grupo Arato avocado holdings to Mission Produce in 2018 and now owns around 20 percent of the stock. The SEC filings say that an entity controlled by Gonzales’ wife will sell 946,800 shares in the offering. Another big investor is Taylor Family Investments, which is also selling 946,800 shares in the offering. Barnard, 68, and his family own about 6.1 million shares, or 9.6 percent of the company, and they’re not selling. The expected price is around $17 per share, which would make the Barnard holdings worth around $100 million, before any additional stock options kick in.

• Mission had a recent stumble in diversification. The SEC filings say that a 60-percent owned blueberry venture in Peru has encountered greater-than-expected competition and it took a small write-down on its investment.

• This is something of a family business. The SEC filings say Steve Barnard’s sons, Ben and Keith, are both vice presidents, and the father and sons are co-owners of an avocado oil venture called AvoPacific Oils.

• This is a big deal for the region. With Calavo and Limoneira both public, the IPO for Mission Produces cements Ventura County’s role as a global hub for lemons, avocados and specialty crops. The IPO will generate a lot of paper wealth for the Barnard family and there will be plenty of people in the region—including some at Cal Poly, San Luis Obispo, Barnard’s alma mater—who will be paying attention.

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