IPO Pours $20.9 Million Into Diedrich’s Coffers

Diedrich Coffee Inc. said it sold 2.2 million common shares of stock Thursday for $9.50 per share, which is below the price range that the Irvine-based coffee chain had anticipated for its initial public offering.

The company, which was family owned, had expected the stock to be offered at $10.50 to $11.50. The offering generated $20.9 million instead of anticipated proceeds of up to $25.3 million.

The stock also began trading Thursday, advancing $1 during the day to close at $10.50 on the Nasdaq market.

Executives from Diedrich and the Boston Group, Los Angeles-based underwriters for the offering, were unavailable for comment Thursday.

Diedrich will use some funds to pay off debt incurred over the past four years as it grew from three Orange County-based stores to 37 shops in California, Colorado and Texas. The company also has signed lease agreements on five new sites, according to documents filed with the Securities and Exchange Commission.

Some of the proceeds also are intended to finance the company’s future expansion, although Diedrich admitted it faces stiff competition from high-profile specialty companies such as Seattle-based Starbucks Corp. Additionally, Kraft General Foods Inc., Proctor & Gamble Co., and Nestle S.A. have joined the specialty trade, offering new lines of canned gourmet coffee in supermarkets.

Diedrich’s name recognition has been largely limited to Southern California. But the company’s filing said it “seeks to differentiate itself and increase its strong brand name recognition by developing and operating sophisticated . . . coffeehouses intended to serve as neighborhood gathering places.”

It is relying on a growing base of coffee drinkers turning to specialized drinks, such as lattes and cappuccinos.

Diedrich posted a profit of $186,000 for the fiscal year ended Jan. 31 on $10.2 million in revenue. The results do not include revenue from the 19 coffeehouses in Texas and Colorado that Diedrich acquired in February.