Cal-Maine Foods, Inc. Announces Acquisition of Egg Production Assets of ISE America, Inc.

Rhea-AI Summary

Cal-Maine Foods (NASDAQ: CALM) has completed the acquisition of ISE America's egg production assets for approximately $110 million, funded with available cash. The acquisition includes assets such as commercial egg production facilities with a capacity of 4.7 million laying hens, feed mills, and 4,000 acres of land. The acquired assets also feature an egg products breaking facility and an extensive customer distribution network across the Northeastern and Mid-Atlantic states. This strategic acquisition aims to enhance Cal-Maine's market presence in these regions, adding new production capacities in Maryland, New Jersey, Delaware, and South Carolina.

Positive

• Acquisition worth $110 million funded with available cash.
• Addition of production facilities with a capacity of 4.7 million laying hens.
• Includes 1.0 million cage-free hens and 1.2 million pullets.
• Acquisition expands Cal-Maine Foods' market reach in the Northeast and Mid-Atlantic regions.
• Acquired assets include feed mills, 4,000 acres of land, and an egg products breaking facility.
• Enhanced distribution network across Northeastern and Mid-Atlantic states.

Negative

• Significant capital outlay of $110 million.

Insights

Financial Analyst

Cal-Maine Foods' acquisition of ISE America's egg production assets is a noteworthy strategic move. The $110 million investment, funded with available cash, underscores Cal-Maine's robust financial health, negating any immediate concerns about leveraging debt for this expansion. The addition of 4.7 million laying hens and the extensive distribution network into their portfolio could bolster the company's revenue and market share in the Northeast and Mid-Atlantic regions, previously lesser markets for them. This could potentially smooth out any regional sales volatility, offering a more stable revenue stream.

From a financial standpoint, investors should observe how effectively Cal-Maine integrates these new assets. The company’s history of efficiently managing acquisitions could translate into a positive return on investment, although it will require time to fully assess the impact on earnings. The move might also be a preemptive strategy to counteract potential market disruptions or increased demand for cage-free eggs.

Overall, this acquisition could enhance the competitive positioning of Cal-Maine, especially in the cage-free segment, positioning them well to meet evolving consumer preferences. Nonetheless, investors should keep an eye on any operational integration challenges and the initial capital expenditure involved.

Market Research Analyst

The acquisition of ISE America's assets allows Cal-Maine Foods to significantly expand their market reach into the Northeast and Mid-Atlantic states. This region's market dynamics are different from Cal-Maine's traditional strongholds and understanding local consumer preferences will be key for successful market penetration. The inclusion of 1 million cage-free hens also aligns with the growing preference for ethically sourced products, which could attract a more conscientious customer base. This segment is expected to grow, driven by consumers' increasing demand for humane food production practices.

The acquisition might lead to synergies in production and distribution, reducing costs and improving operational efficiency. However, market analysts will be closely monitoring how Cal-Maine manages to integrate the new operations without disrupting their current supply chain. The company's proven track record in leveraging acquired assets for growth is promising, but each acquisition carries its unique set of challenges and risks.

RIDGELAND, Miss.--(BUSINESS WIRE)-- Cal-Maine Foods, Inc. (NASDAQ: CALM) (“Cal-Maine Foods” or the “Company”) today announced the Company has completed the acquisition of substantially all the assets of ISE America, Inc. and certain affiliates (“ISE”) for approximately $110 million. Cal-Maine Foods is funding the acquisition with available cash on hand. The acquired ISE assets include commercial shell egg production and processing facilities with current capacity of approximately 4.7 million laying hens, including 1.0 million cage-free, and 1.2 million pullets, feed mills, approximately 4,000 acres of land, inventories and an egg products breaking facility. The acquired assets also include an extensive customer distribution network across the Northeast and Mid-Atlantic states, and production operations in Maryland, New Jersey, Delaware and South Carolina.

Commenting on the announcement, Sherman Miller, president and chief executive officer of Cal-Maine Foods, Inc., stated, “We are excited about the opportunity to significantly enhance our market reach in the Northeast and Mid-Atlantic states with the acquisition of these assets from ISE. The added production and distribution capabilities will allow us to serve new customers and expand capacity, particularly in the Northeast, which is largely a new territory for Cal-Maine Foods. We are also acquiring production assets for the first time in Maryland, New Jersey and Delaware. ISE has a long history in the egg production business and enjoys a solid reputation in the marketplace. We will continue to honor this important legacy as we build new connections and customer relationships. Cal-Maine Foods has a strong record of driving value from our acquired operations with a proven operating model. We welcome the dedicated ISE operations team to the Cal-Maine Foods family and look forward to a successful integration. Working together, we have a unique opportunity to deliver greater value to both our customers and shareholders.”

About Cal-Maine Foods

Cal-Maine Foods, Inc. is primarily engaged in the production, grading, packaging, marketing and distribution of fresh shell eggs, including conventional, cage-free, organic, brown, free-range, pasture-raised and nutritionally enhanced eggs. The Company, which is headquartered in Ridgeland, Mississippi, is the largest producer and distributor of fresh shell eggs in the United States and sells the majority of its shell eggs in states across the southwestern, southeastern, mid-western and mid-Atlantic regions of the United States.

Forward Looking Statements

Statements contained in this press release that are not historical facts are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. The forward-looking statements are based on management’s current intent, belief, expectations, estimates and projections regarding our company and our industry. These statements are not guarantees of future performance and involve risks, uncertainties, assumptions and other factors that are difficult to predict and may be beyond our control. The factors that could cause actual results to differ materially from those projected in the forward-looking statements include, among others, (i) the risk factors set forth in the Company’s SEC filings (including its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K), (ii) the risks and hazards inherent in the shell egg business (including disease, pests, weather conditions and potential for recall), including but not limited to the most recent outbreak of highly pathogenic avian influenza affecting poultry in the U.S., Canada and other countries that was first detected in commercial flocks in the U.S. in February 2022 and that first impacted our flocks in December 2023, (iii) changes in the demand for and market prices of shell eggs and feed costs, (iv) our ability to predict and meet demand for cage-free and other specialty eggs, (v) risks, changes or obligations that could result from our future acquisition of new flocks or businesses and risks or changes that may cause conditions to completing a pending acquisition not to be met, (vi) risks relating to increased costs and higher and potentially further increases in inflation and interest rates, (vii) our ability to retain existing customers, acquire new customers and grow our product mix, (viii) adverse results in pending litigation matters, and (ix) global instability including as a result of the war in Ukraine, the Israel-Hamas conflict and attacks on shipping in the Red Sea. SEC filings may be obtained from the SEC or the Company’s website, www.calmainefoods.com. Readers are cautioned not to place undue reliance on forward-looking statements because, while we believe the assumptions on which the forward-looking statements are based are reasonable, there can be no assurance that these forward-looking statements will prove to be accurate. Further, the forward-looking statements included herein are only made as of the respective dates thereof, or if no date is stated, as of the date hereof. Except as otherwise required by law, we disclaim any intent or obligation to publicly update these forward-looking statements, whether as a result of new information, future events or otherwise.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240628433127/en/

Sherman Miller, President and CEO

Max P. Bowman, Vice President and CFO

(601) 948-6813

Source: Cal-Maine Foods, Inc.

FAQ

What is the value of Cal-Maine Foods' acquisition of ISE America’s assets?

Cal-Maine Foods' acquisition of ISE America's assets is valued at approximately $110 million.

What production capacity did Cal-Maine Foods acquire from ISE America?

Cal-Maine Foods acquired facilities with a production capacity of 4.7 million laying hens, including 1.0 million cage-free hens and 1.2 million pullets.

How did Cal-Maine Foods fund the acquisition of ISE America’s assets?

Cal-Maine Foods funded the acquisition with available cash on hand.

Which new territories will Cal-Maine Foods expand into with this acquisition?

This acquisition will enable Cal-Maine Foods to expand into new territories in the Northeast, particularly Maryland, New Jersey, Delaware, and South Carolina.

What additional assets were included in Cal-Maine Foods' acquisition of ISE America?

The acquisition included feed mills, 4,000 acres of land, an egg products breaking facility, and an extensive customer distribution network.