NUT WARS IN PARADISE

							                                        NUT WARS IN PARADISE

                        Jack P. Suyderhoud, University of Hawaii at Manoa


                                          Case Objectives and Use

This case is about a battle between a macadamia nut grower (ML Macadamia Orchards, LLP)
and a macadamia nut processor (Mauna Loa Macadamia Nut Corp.). In 2004, the macadamia
nut industry in Hawaii was rocked by the announcement of Mauna Loa’s intent to merge with
the second largest processor of nuts. This case focuses on how the ML Macadamia Nut
Orchards, the largest macadamia nut grower, responded to the announced merger by using
government rules and connections to eventually thwart the merger. The case allows students to
see how changing circumstances can undermine important relationships, how the government
can be used as a strategic tool, and what is required to use government antitrust rules, in
particular merger guidelines, to fight a merger that may threaten a business. The case can thus
be used for courses in managerial economics, the economics of strategy, and government and
business.

                                                 Case Synopsis

Dennis Simonis and Jim Case were, respectively, president and board member of the managing
partner of ML Macadamia Orchards, LLP (MLMO). The publicly traded limited partnership
was started in 1986 and became Hawaii’s largest macadamia nut grower. All of MLMO’s
output was sold under long-term contracts to Mauna Loa Macadamia Nut Corp., the largest
processor and marketer of Hawaiian macadamia nuts. Though these contracts worked well
initially when the relationships between the grower and processor were friendly, the sale of the
processor in 2000 to a “mainland” equity investor created problems. These problems came to a
head when Mauna Loa announced that it intended to merge with MacFarms of Hawaii, the
second largest processor and marketer of macadamia nuts, two years before the long-term nut
purchase contracts were to expire.

Simonis and Case regarded the merger as a threat to the viability of MLMO since their nuts
would have only one effective outlet: the enlarged Mauna Loa. They decided to respond to this
challenge by filing suit to stop the merger, utilizing the U.S. government’s “merger guidelines”.
Simonis and Case had to convince the courts that the merger would violate the guidelines and
be detrimental to the industry and the state. In such cases, issues of how to define markets and
measure market concentration are vital. Both sides in the legal battle used experts to make
their cases. Eventually, MLMO prevailed and the “mainland” investor sold Mauna Loa to
Hershey Foods Corp.


The author developed the case for class discussion rather than to illustrate either effective or ineffective handling
of the situation. The case, instructor’s manual, and synopsis were anonymously peer reviewed and accepted by the
North American Case Research Association (NACRA) for its annual meeting, October 27-29, 2005, North
Falmouth, MA. All rights are reserved to the author and NACRA.  2005 by Jack P. Suyderhoud. Contact
person: Jack P. Suyderhoud, College of Business Administration, University of Hawaii at Manoa, 2404 Maile
Way, Honolulu, HI, 96825, 808-956-8503, suyderho@hawaii.edu