Hawai'i's macadamia nut industry is about to undergo more change following yesterday's announcement that ML Macadamia Orchards LP intends to purchase competitor MacFarms of Hawaii LLC.

Under a non-binding letter of intent announced yesterday, ML Macadamia, the world's largest grower of macadamia nuts, also intends to lease a nearly 4,000-acre macadamia orchard owned by a MacFarms affiliate. The deal is expected to close in early 2007 after the completion of due diligence and approvals of the boards of directors of the companies involved. Terms were not disclosed.

If approved, the deal would expand ML Macadamia's 4,169 acres of orchards and allow it to process and market nuts industrially and under the brand names MacFarms, Kona Select and Hula Princess. MacFarms owns the second largest macadamia nut processing facility in Hawai'i. Mauna Loa Macadamia Nut Corp. is the state's largest processor of unprocessed macadamia nuts.

The proposed sale also follows other recent industry events such as the 2004 purchase of Mauna Loa Macadamia by Hershey, Pa.-based Hershey Foods Corp. for $112.4 million and the assumption of $17.6 million in debt. That sale came just weeks after Mauna Loa abandoned its own bid to buy MacFarms.

Mauna Loa's bid was opposed by ML Macadamia and maca-damia nut grower and processor Hamakua Macadamia Nut Co. Inc. on grounds the sale would create a macadamia processing monopoly.

Dennis Simonis, president and chief executive officer of ML Macadamia, said his company's bid to buy MacFarms would not create such concerns. A combined ML Macadamia/MacFarms operation would encompass about 50 percent of Hawai'i's total supply of macadamia nuts. However, that would not hurt other nut farmers and processors.

"It's a totally different situation," Simonis said. "The growers will still have a choice, and customers will still have a choice."

Ultimately, ML Macadamia hopes to expand the market for Hawai'i macadamia nuts, which should benefit all growers, Simonis said. He did not expect the potential acquisition to result in any job losses.

The Big Island is the second-largest producer of macadamia nuts in the world. About 650 nut growers on the island produce a crop worth about $47 million for local farmers.

ML Macadamia management could refocus MacFarms on agriculture as opposed to land development, said Jim Trump, president for North Kohala grower Island Harvest Inc.

"My sense is that this is probably a good thing," he said. "We need people who are in agriculture running processing and manufacturing because they understand it.

Phone messages left at MacFarms were not returned yesterday.

Richard Schnitzler, president for Hamakua Macadamia, was unsure how the proposed deal would affect his business.

"We would be getting 50 percent of our supplies from a competitor," he said. "What that means we don't know at this point.

"We're already looking at it hard to see what it means to us."

ML Macadamia Orchards' shares closed up one cent at $5.49 on the New York Stock Exchange yesterday.

Reach Sean Hao at shao@honoluluadvertiser.com.