Second macadamia lawsuit fights deal
By Kevin Dayton
Advertiser Big Island Bureau
HILO, Hawai'i — A second lawsuit has been filed in Hilo to try to block Mauna Loa Macadamia Nut Corp. from buying competitor MacFarms of Hawai'i.
Hamakua Macadamia Nut Co. Inc., a mac nut processor that competes with Mauna Loa, is alleging that the sale would violate state laws prohibiting unfair competition, monopoly systems and illegal restraint of trade.
"The acquisition presents a very real threat that Mauna Loa will engage in predatory pricing schemes and predatory conduct" designed to force three smaller processors out of the market, including Hamakua, the suit said.
Cynthia Quinn, spokeswoman for Mauna Loa, said the company believes that the suit is improper and will soon file motions to have both the Hamakua suit and an earlier lawsuit dismissed.
"We think the proper place to express those concerns would be the attorney general's office," which has the power to intervene and sue if a transaction violates state antitrust laws, she said.
Mauna Loa Macadamia Nut Holdings Inc. agreed in July to buy MacFarms for an undisclosed price. Mauna Loa is the Big Island's largest buyer and processor of unprocessed mac nuts.
MacFarms is second largest, employing more than 50 full-time workers and about 75 seasonal employees, with reported sales of $27 million in 2002, according to the suit. MacFarms, which has its own orchards, supplies about 13 percent of the unprocessed nuts on the island.
In the year ending June 30, Mauna Loa bought 56 percent of the Big Island nut supply while MacFarms bought 20 percent, so between them they bought 76 percent of the supply, according to the suit
Mauna Loa buys unprocessed nuts from growers but does not have its own orchards. However, it controls about 53 percent of the total supply of unprocessed nuts through long-term purchase contracts with growers, the suit said. The suit alleges that the sale would give Mauna Loa control of 66 percent of the island's nut supply.
"The acquisition will eliminate the only competitor with economic resources comparable to those of Mauna Loa," according to the suit by Hamakua.
Quinn said Mauna Loa is interested only in the 3,900 acres of leased orchards controlled by MacFarms and is looking for a buyer to take over the MacFarms processing plant and brand name. She said Mauna Loa is negotiating with "several" potential buyers for those pieces of the MacFarms operation.
Spinning off the processing operations should eliminate any concern that Mauna Loa would be able to control prices to farmers, Quinn said. She said world competition will prevent Mauna Loa from controlling consumer prices.
The attorney general "can step in at any time to stop this, and we have to present something that's suitable and passes antitrust muster," she said.
Hamakua, established in 1994, began processing operations in 2000. It processes about 6 million pounds of wet nuts a year, or about 10 percent of the unprocessed nuts on the Big Island, according to the suit.
ML Macadamia Orchards L.P. of Hilo and three smaller growers sued Mauna Loa earlier this month, challenging the sale on similar grounds.
The Big Island is the second-largest producer of mac nuts in the world. There are about 650 nut growers on the island producing about 60 million pounds of nuts a year, a crop worth about $32 million.
Reach Kevin Dayton at kdayton@honoluluadvertiser.com or (808) 935-3916.
