Bidding war for Diedrich Coffee escalates

EMERYVILLE Calif. Peet’s Coffee & Tea Inc. is battling with Green Mountain Coffee Roasters Inc. for the purchase of Diedrich Coffee Inc., and both suitors upped their bids this week to what they valued at $265 million.

Both Peet’s and Green Mountain are eyeing Diedrich for its expertise in producing and selling specialty coffees for K-Cups used in Keurig Inc.’s popular single cup brewing system and its roasting capabilities. Keurig is owned by Green Mountain. The acquirer also would pick up Diedrich’s Coffee and Coffee People brands, as well as control of the single-serve rights to the Gloria Jean’s coffee label.

On Monday, Peet’s raised its initial bid [3] of $26 per share to $32 per share, which would be paid in cash and stock. On Tuesday, Green Mountain matched the $32 per share offer, and said it would pay fully in cash. Both companies valued their offers at $265 million, with Peet’s basing it on its stock price at Friday’s close. Because Peet’s stock price has fallen this week, its latest offer would really total about $30.41 per share.

If Green Mountain wins Diedrich, it will mark the company's third acquisition of a branded wholesale business this year, behind Tully's Coffee and Timothy's Coffees of the World, the later of which it purchased for about $157 million.

Diedrich has said it would review both proposals. Its stock increased nearly 1 percent Tuesday to close at $33.91, reaching a new 52-week high. The stock has risen 31 percent since Friday. Green Mountain’s stock fell 2.3 percent Tuesday to $63.96 and has dropped 1.6 percent since Friday. Peet’s stock fell 0.6 percent Tuesday to $32.86, and has fallen 13.5 percent since Friday.

For the 39 weeks ended Sept. 27, about 66 percent of Peet’s $219.6 million in revenue came from its 195 retail stores selling prepared coffee drinks, beans and specialty goods. The other 33 percent stemmed from the sale of coffee or beans to grocers, foodservice and office-coffee suppliers.

Contact Alan J. Liddle at [email protected] [4].