Growers to sue
over merger

Several local macadamia nut growers
plan to seek an injunction against
the pending marriage of the state's
top 2 macadamia nut processors

ML Macadamia Orchards LP and five other macadamia growers plan to seek an injunction stopping a merger between the state's top two macadamia nut processors.

James Case, senior partner at law firm Carlsmith Ball and a director of ML Macadamia's general partner, ML Resources Inc., confirmed last night that the growers intend to file a lawsuit as early as tomorrow in Circuit Court in Hilo to prevent Mauna Loa Macadamia Nut Corp.'s parent from proceeding with its purchase of MacFarms of Hawaii LLC.

In response, Mauna Loa's attorney said yesterday that the company has been meeting with the state Attorney General's Office to discuss any antitrust concerns.

Even though the Attorney General's Office is reviewing the deal, ML Macadamia decided to spearhead the legal action because of the impact that it claims a merger would have on other nut growers and processors on the Big Island.

The merger, announced in July, would give Mauna Loa, the state's largest processor, about three-quarters control of both the state's macadamia nut harvest and processing capability.

"We're pretty certain that this transaction violates antitrust law in Hawaii," said Dennis Simonis, president and chief operating officer of ML Macadamia Orchards, the state's top grower. "It's not a good thing for the macadamia grower, the consumers or the processors.

"The attorney general is investigating, but we couldn't be sure he was going to take action. So we had to take action ourselves."

Mauna Loa, which has contracts to exclusively purchase all of the nuts harvested by ML Macadamia, wants to acquire MacFarms to grow the Mauna Loa business and try to meet unfulfilled global demand. Since Mauna Loa already has one processing plant, it told the Attorney General's Office it would be willing to sell the MacFarms plant it would acquire in the deal to resolve any antitrust concerns.

That divestiture still would leave Mauna Loa access to the nuts grown by MacFarms, which is Hawaii's No. 2 grower and processor.

"There are ongoing discussions (to sell the processing plant) with a number of different people," Mauna Loa attorney Margery Bronster said.

"We have had ongoing discussions with the attorney general and we have repeatedly indicated that we are looking to meet with them and discuss any issues they are concerned about with regards to their investigation," added Bronster, a former state attorney general.

Case previously said ML Macadamia wouldn't have any problems with Mauna Loa acquiring MacFarms' orchards as long as the processing plant was divested. But he said yesterday that the company has changed its position.

"We now have decided if they acquire the orchards, they would have such a huge control over the supply of nuts that the competitor processors would not be able to get any nuts," he said. "The acquisition of orchards is just as serious as acquiring the processing plant. They would also control the supply of nuts because they have long-term contracts with orchards and would control 75 percent of the nuts."

Case said the objective of the suit is to ensure that there would be competitive processors in the market to whom growers can sell their nuts and receive good prices. He said even if Mauna Loa were to sell the processing plant, it still could set the price for growers because of its dominant position over the nut supply.

Meanwhile, ML Macadamia, which owns or leases more than 4,100 acres on the Big Island, reported second-quarter earnings yesterday that showed a narrower loss from a year ago in what is historically a slow harvest period.

The company's loss in the quarter was $161,000, or 2 cents a unit, compared with a loss of $185,000, or 2 cents a unit, a year ago. The second quarter normally accounts for less than 4 percent of the company's full-year harvest.

ML Macadamia said different weather patterns created a late harvest and resulted in nut sales plunging nearly 59 percent to $153,000 from $372,000 a year ago. Farming revenue declined nearly 14 percent to $634,000 from $736,000. Total revenues dropped 29 percent to $787,000 from $1.1 million.

The partnership received an average price per pound of just under 50 cents in the quarter compared with an average price of about 46 cents a year earlier.



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