Cal-Maine Foods to acquire Echo Lake Foods for $258 million

RIDGELAND, Miss. - Cal-Maine Foods, Inc. (NASDAQ:CALM), the nation's largest producer and distributor of fresh shell eggs, announced robust financial results for the third quarter of fiscal 2025 ending March 1, with net sales reaching $1.4 billion and net income of $508.5 million, or $10.38 per diluted share. The company maintains an "EXCELLENT" financial health score according to InvestingPro analysis, with a strong current ratio of 5.46 and more cash than debt on its balance sheet. These figures represent a significant increase from the previous year, driven by strong consumer demand and higher average selling prices for shell eggs amid supply constraints due to Highly Pathogenic Avian Influenza (HPAI).

The company also disclosed its definitive agreement to acquire Echo Lake Foods, Inc., a producer of ready-to-eat egg products and breakfast foods, for approximately $258 million, excluding expected tax assets. According to InvestingPro analysis, Cal-Maine Foods appears undervalued at current levels, trading at an attractive P/E ratio of 7x and showing strong growth potential. The transaction, funded with available cash on hand, is projected to close by the end of fiscal 2025, pending regulatory approvals and customary closing conditions.

Cal-Maine Foods reported a substantial increase in production capacity, including a 14% rise in the average number of layer hens and a 33% expansion of breeder flocks compared to the prior-year quarter. To address the tight egg supply situation, the company is completing approximately $60 million in expansion projects and has integrated newly acquired assets that are expected to further increase production.

Additionally, the company has declared a cash dividend of approximately $170 million, or $3.46 per share, and has approved a $500 million share repurchase program to provide flexibility in capital allocation. The company's dividend yield stands at 6.37%, significantly above its 5-year average of 4%. These decisions align with Cal-Maine Foods’ strategy to optimize shareholder value in a volatile market.

Sherman Miller, president and CEO of Cal-Maine Foods, praised the team's efforts to maximize production and maintain biosecurity measures during high demand, while acknowledging the administration's plan to address volatility in the egg industry. The acquisition of Echo Lake Foods is seen as a strategic move to enter the value-added food segment and diversify the company's product portfolio and customer base.

Echo Lake Foods, with a history dating back to 1941, had annual revenues of approximately $240 million in 2024 and is expected to complement Cal-Maine Foods’ existing operations. Kathy Brodhagen, the current CEO of Echo Lake Foods, is set to join Cal-Maine Foods’ senior management team post-acquisition.

This article is based on a press release statement from Cal-Maine Foods, Inc.

In other recent news, Cal-Maine Foods has reported significant developments that are of interest to investors. The company has entered into a Second Amendment to its Amended and Restated Credit Agreement, which modifies the definition of "Change of Control" in relation to its credit facilities, allowing for the potential conversion of Class A shares into Common Stock. Additionally, Cal-Maine Foods has formalized Indemnification Agreements with its directors and certain officers to protect against personal liability, and has filed its Third Amended and Restated Certificate of Incorporation and Bylaws, altering the rights of Common Stock holders. In a strategic move, Cal-Maine Foods has expanded its operations with the acquisition of assets from Deal-Rite Feeds, Inc., including two feed mills in North Carolina, to enhance production capabilities and reduce costs.

Furthermore, Stephens, a financial services firm, has significantly raised its earnings per share estimates for Cal-Maine Foods for the third quarter and full fiscal year 2025, citing the impact of avian influenza on egg prices. Despite a recent decline in egg prices, Stephens has adjusted its fiscal year 2026 estimate as well, reflecting a robust outlook for the company. Meanwhile, Stephens analyst Pooran Sharma has maintained an Equal Weight rating on Cal-Maine Foods, with a price target of $97, noting the recent decline in egg prices and the potential for a seasonal price rebound around Easter. These developments underscore Cal-Maine Foods' efforts to maintain robust corporate governance, expand its operational capabilities, and navigate the fluctuating egg market.

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