November 25, 2009, 12:00 AM

Green Mountain and Peet’s Coffee are in a bidding war for coffee retailer

Green Mountain Coffee Roasters’ revised bid of $265 million for Diedrich Coffee has taken the lead in an acquisition race with Peet’s Coffee & Tea. Green Mountain’s offer is all cash, while Peet’s bid was valued in cash and stock.

Green Mountain Coffee Roasters Inc.’s revised bid of $265 million, or $32 a share, for Diedrich Coffee Inc. has taken the lead in a pitched battle with Peet’s Coffee & Tea Inc. Green Mountain’s offer is all cash, while Peet’s latest bid-also valued at $265 million-was a combination of cash and stock.

Diedrich issued a statement today indicating that Green Mountain had made the “superior” offer on Tuesday, after Green Mountain sweetened an earlier bid of $30 per share in cash with a projected value of $247 million.

On Nov. 2 Peet’s and Diedrich announced that Peet’s would acquire Diedrich for cash and stock worth about $213 million. That announcement touched off bids and counter-bids from Green Mountain and Peet’s, culminating in Green Mountain’s offer of $265 million in cash. The revised proposal also calls for Green Mountain to pay Diedrich a merger termination fee of $8.51 million if the acquisition did not conclude under specific, undisclosed circumstances.

Diedrich said today that its board of directors considers the Green Mountain bid to be superior to that from Peet’s. Peet’s has until 5:00 p.m. PST Friday to make another proposal, under terms of the original agreement with Diedrich.

“Diedrich`s has three coffee brand platforms which will be complementary to GMCR`s brands: Diedrich, Gloria Jean’s, and Coffee People,” says Lawrence J. Blanford, Green Mountain’s president and CEO. “The Diedrich brand offers strong Southern Californian coffeehouse heritage and will work well alongside GMCR’s successful Tully’s brand in the Pacific Northwest. Gloria Jean’s is a premium coffee brand, widely known for its expertise in flavored coffees and indulgent beverages, and is highly visible in malls where Keurig brewers are sold. This is expected to broaden our flavored coffee and dairy-based beverage offerings.”

The acquisition is expected to expand sales for one-cup coffeemakers from Green Mountain’s Keurig subsidiary. “Diedrich also owns and operates manufacturing and distribution facilities in Southern California which, upon completion of this transaction, will enable us to more effectively reach consumers in this region,” Blanford says. The combined company will have manufacturing and distribution locations in Waterbury and Essex, VT, Knoxville, TN, Seattle, Castroville, CA, and Toronto.

If the deal becomes final, Green Mountain’s acquisition of Diedrich would be its second in November. On Nov. 15 Green Mountain acquired the coffee brand and wholesale operations of Toronto-based Timothy’s Coffees of the World Inc. for nearly $157 million in cash from an affiliate of private equity firm Sun Capital Partners Inc.

Green Mountain Coffee Roasters is No. 120 in the Internet Retailer Top 500 Guide, (a PDF version of the company’s financial and operating profile can be ordered by clicking on its name).

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