Flush with Cash, Cal-Maine Plans to Acquire Egg Patty Maker and Pay Out Family Owners

Average U.S. egg prices hit a record $6.22 per dozen last month, ahead of the Easter egg rush. Last week, the nation’s largest egg corporation posted massive profits, which it will use to enrich its founding family members and acquire an egg processing business.

Cal-Maine reported $508 million in net income this past quarter, more than three times what it made in the same period last year. Its profits are nearly eight times as high as in February 2022, when bird flu started spreading in the U.S.

Farmer and food justice advocates have accused Cal-Maine, and other egg companies, of exploiting the latest bird flu outbreak to raise prices well above what supply and demand would predict. The Department of Justice recently opened an antitrust investigation into the egg industry, including Cal-Maine. Farmer groups and industry researchers charge that egg corporations may have manipulated an industry price index or held back on rebuilding their flocks to inflate prices.

In its latest investor report, Cal-Maine did note that it expanded its breeder and egg-laying flocks “to help mitigate the tight egg supply.” Cal-Maine plans to spend approximately $60 million this year on internal expansion projects, but it will spend even more on stock buybacks, investor dividends, and an acquisition.

Cal-Maine will pay investors a cash dividend of $3.46 per share, totaling $170 million, and approved as much as $500 million in stock buybacks later this year, its largest stock buyback in nearly two decades. Normally, corporations buy their stock to shrink the shares in circulation and boost share value. In this case, Cal-Maine’s founding family will turn a chunk of their controlling stock into cash, and company coffers will help pay them out.

Cal-Maine’s stock value has more than doubled in the past five years and currently sits 60% higher than its all-time pre-2021 peak (which was in 2015, during the last bird flu outbreak), making it a good time for its largest shareholders to cash out. The four daughters of Cal-Maine’s founder plan to sell a large portion of their holdings, more than 3.5 million shares, and give up their control of the company. Cal-Maine will spend up to $50 million to buy some shares directly from the family for an undisclosed price per share and then will spend as much as $450 million buying shares at the going stock market price. Based on the current value of Cal-Maine’s stock, $500 million should be enough to buy up the family’s 3.5 million outgoing shares and then some.

In addition to this stock buyback, Cal-Maine announced plans to acquire Echo Lake Foods for $258 million, paid with cash on hand. Echo Lake Foods is the third-largest producer of pre-cooked eggs and offers conventional and cage-free products. Echo Lake makes pre-cooked egg patties, scrambled eggs, omelets, pancakes, and waffles for convenience stores, caterers, and private-label grocery store brands. The Wisconsin-based company operates four factories across the Midwest.

Cal-Maine already makes liquid egg products and runs joint ventures with companies that make pre-peeled boiled eggs, crepes, and egg wraps. This acquisition will further vertically integrate Cal-Maine’s business into egg processing to capture more egg industry profits. As the largest U.S. egg producer, Cal-Maine has a clear competitive advantage over other egg processors, which may rely on Cal-Maine as a supplier. Cal-Maine produces about 20% of all eggs in the U.S.

Notably, Cal-Maine’s latest investor report does not mention any investments in compensation for farmers. Cal-Maine sources most of its eggs from farms it owns, but it sources roughly 10% from independent contract farmers. Despite several years of record profits, one farm family that raises eggs on contract for Cal-Maine told Farm Action that their last pay raise was roughly six years ago, and it was just $0.0125 per dozen, or a little over a penny. The anonymous farmers claimed that this pay increase did not cover their rising input costs and over the years their net income has declined. They said they would need at least a 6.5 cent increase to make the same income today as they did when they started.