A couple of years ago, my family and I went to the Mauna Loa visitor center in Hilo. As an endearing Hawaiian institution, I relished the free samples and bought a few trinkets to take home. Little did I know that if I had millions in change in my pockets that day, I could have possibly made the macadamia nut specialist mine.
Mauna Loa produced $80 million in sales last year. It is unlikely to have any kind of immediate impact on the top or bottom line of a company such as Hershey, which has $4 billion in annual sales.
The deal is a sweet one, and I'll get to the reasons why, but let's not swallow Hershey's comments as an endorsement that earnings will now come in much higher than projected. Buying Mauna Loa makes sense, but it won't necessarily add cents. Don't flunk out of the macadamia academia!
Getting back to the logic of the purchase, it's not just about the possibility of a Hershey chocolate bar with macadamia nuts. Actually, that's not all that likely given the pricey nuts. What is important here is that Hershey's wide reach of distribution should help grow Mauna Loa's sales.
Just as Wrigley's
For the number crunchers, the deal isn't all that nutty either. Hershey is trading for three times trailing sales and it is scooping Mauna Loa at half that multiple and it will be accretive to earnings. Chocolate and nuts? They just get along so well together.
Macadamia nuts work well as a standalone snack or in decadent cookies, but would it fly well in a mainstream chocolate bar? What is your favorite type of chocolate? Do you go crazy for cocoa stuff? What is your favorite cocoa treat? All this and more -- in the Give Me all the Chocolate!! discussion board. Only on Fool.com.
Longtime Fool contributor Rick Munarriz is looking for pictures of when he took on the inflatable Mauna Loa mascot in a stare-down contest out in Hawaii -- and lost. He does not own shares in any of the companies mentioned in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks today.