WATERBURY Vt. Green Mountain Coffee Roasters Inc. said Tuesday that it has entered into a definitive merger agreement to acquire Diedrich Coffee Inc. for $35 per share in cash, or about $290 million, marking the end of a bidding war with Peet’s Coffee & Tea Inc.
Green Mountain said it believes it can close the deal for Irvine, Calif.-based Diedrich by early next year.
Separately, Diedrich said it terminated an earlier merger agreement with Peet’s and that Green Mountain paid the $8.5 million termination fee.
Peet’s said Monday it had chosen not to counter Green Mountain’s Dec. 1 bid of $35 per share for Diedrich, and it withdrew its last offer of $32.50 per share. However, the Emeryville, Calif.-based purveyor of specialty coffees and operator of 195 coffee bars said it would leave on the table its original Nov. 2 bid for Diedrich of $26 a share, should the Green Mountain-Diedrich merger fall through or stall because of antitrust concerns by regulators.
Both Peet’s and Green Mountain have been courting Diedrich Coffee 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. Diedrich markets three brands of specialty coffees -- Diedrich Coffee, Coffee People and Gloria Jean's Coffees -- through office coffee service distributors, restaurants and specialty retailers and online.
Keurig has been owned since 2006 by Green Mountain, which recently acquired the roasting and K-Cup-production operations of two other companies: Tully’s Coffee and Timothy’s Coffees of the World. It is Green Mountain’s growing control over K-Cup production that Peet’s has suggested could lead regulators to balk at the Green Mountain-Diedrich combination for federal Hart-Scott-Rodino antitrust regulation reasons.
Should the deal fall through for that reason or others, Green Mountain has agreed to pay Diedrich between $8.5 million and $10.5 million, depending on how long the process drags.
“This combination further advances our objective of becoming a leader in the highly fragmented and competitive coffee and coffee maker businesses and provides significant growth opportunities for Green Mountain stakeholders,” said Lawrence J. Blanford, president and chief executive of Waterbury-based Green Mountain. “In particular, adding Diedrich’s three strong brand platforms, which are highly complementary to GMCR’s brands, as well as its manufacturing and distribution facilities in California will, upon completion of this transaction, enable us to more effectively reach consumers across North America and do so with an enhanced array of coffee choices.”
Paul C. Heeschen, Diedrich’s chairman, said, “This transaction maximizes value for our shareholders and is expected to bring new opportunities for both our employees and brands to grow as part of a stronger business platform.”
Green Mountain officials said they anticipate the acquisition of Diedrich will be neutral to slightly accretive to earnings within the first 12 months following the close, excluding one-time transaction expenses. They said the company intends to fully finance the transaction through cash on hand and existing bank lines of credit.
The full terms and conditions of the Green Mountain offer for Diedrich will be filed with the U.S. Securities & Exchange Commission later this week, the company said.
Green Mountain’s bidding contest with Peet’s drove up the eventual acquisition price by about 36 percent, based on the $214 million valuation associated with Diedrich’s number of outstanding shares and Peet’s original $26 per share offer of Nov. 2. If the merger closes as planned, it will mark an impressive return for some Diedrich shareholders, as the company’s stock traded for as low as 21 cents a share during the past year.
Contact Alan Liddle at [email protected].
