Coffee War for Diedrich’s Kcups
Wow! Green Mountain is pretty serious about keeping its rollup of Keurig KCup licensees to itself. After Peet’s offered to buy Diedrich’s at $26 per share, Green Mountain made its own offer at $30 per share in cash. Now Peet’s is back in it with a $32 per share offer.
Of course, I was looking forward to a Peet’s Kcup, so I was pretty excited about the original deal. But, now it’s a muddled world of coffee intrigue and we’ll have to sit and wait to see who wants Diedrich more. Green Mountain has a lot more resources (and cash), so I’ve got to think if they want to win this war, they will. We shall see…
http://www.bloomberg.com/apps/news?pid=20601103&sid=aYr6a9MAPpak
Peet’s Raises Diedrich Offer After Green Mountain Bid
By Courtney Dentch
Nov. 23 (Bloomberg) — Peet’s Coffee & Tea Inc. raised its offer to buy Diedrich Coffee Inc. by 24 percent to about $265 million after Green Mountain Coffee Roasters Inc. made a competing bid.
Peet’s increased its bid to $32 a share in cash and stock from a Nov. 2 offer of $26, according to a statement by the Emeryville, California-based company today. Green Mountain, which is based in Waterbury, Vermont, confirmed in a separate statement its offer for $30 a share in cash.
The acquisition would give Peet’s access to Diedrich’s license to make K-Cup brand coffee packets, single-servings used with Green Mountain’s Keurig brewing equipment. Green Mountain has been consolidating the K-Cup licenses. It bought Tully’s Coffee Corp. in March and Timothy’s Coffees of the World Inc. earlier this month.
“Green Mountain has been active in rolling up the current participants in the K-Cups,” said Matt DiFrisco, an analyst with Oppenheimer & Co. in New York. He has a “market perform” rating on Peet’s and doesn’t rate Green Mountain. “There’s clearly an advantage in the faster-moving K-Cup business than in the machines themselves.”
Green Mountain makes about 6.4 cents per K-Cup in licensing fees and could double that by selling them directly, said Mitchell Pinheiro, an analyst with Janney Montgomery Scott LLC in Philadelphia. He expects Keurig brewers to climb to 7 million installed units next year, from 3.5 million this year.
Peet’s fell $4.94, or 13 percent, to $33.06 at 4 p.m. New York time on the Nasdaq Stock Market. It was the biggest decline since February 2001.
Diedrich jumped $7.66, or 29 percent, to $33.65, the biggest gain since April 30. Green Mountain rose 43 cents to $65.44.
Evaluating New Offer
Diedrich, based in Irvine, California, said in a statement that it is evaluating Peet’s new offer. On Nov. 20, the company informed Peet’s that it had determined Green Mountain’s offer to be the superior proposal.
Peet’s has until 5 p.m. California time Nov. 27 to convince Diedrich its offer is more attractive than Green Mountain’s. Diedrich must pay a breakup fee to Peet’s of $8.52 million if it walks away from the offer, according to the merger agreement filed with the U.S. Securities and Exchange Commission Nov. 2.
“We would not rule out the possibility of a higher bid from Green Mountain,”David Tarantino, an analyst with Robert W. Baird & Co. in Milwaukee, wrote in a note today. He rates Peet’s stock “outperform.”
Peet’s plans to fund part of the offer with cash on hand and $140 million in debt financing from Wells Fargo Bank, National Association and Wells Fargo Securities LLC.
“They have the financial flexibility” to back the increased bid, DiFrisco said. “They haven’t voiced how much debt they want to take on to finance this.”
