Irvine-Based Diedrich Coffee’s Shares Fall 15%

Shares for Diedrich Coffee Inc. fell more than 15% on Thursday, the day after the Irvine-based company sold 4.6 million shares in a secondary offering priced at $6--more than 14% below its Wednesday closing price of $7.

The regional coffeehouse chain netted $23.3 million in the offering, which will be used to help pay for its approximately $32-million acquisition of Coffee People Inc., a Castroville-based specialty coffee chain. Shareholders approved the deal Wednesday and it is expected to close on July 7.

Diedrich Chairman John Martin said the $6-a-share offering price was based on Diedrich’s trading activity over the past three months. Diedrich shares rose 38 cents, to $7, Wednesday in Nasdaq trading following the company’s annual shareholders meeting.

“Six dollars was what we thought was a very good price,” Martin said Thursday. “It jumped up [Wednesday]. It actually wasn’t trading at $7. We were at 20,000 shares [trading volume] when the meeting ended and when [the stock market] closed, it was close to 60,000. I think some of the shareholders went out and bought after the meeting.”

Officials at San Francisco-based BancBoston Robertson Stephens Inc., the lead underwriter of the offering, declined to comment Thursday.

Diedrich shares fell to $5.94 on Thursday, down $1.06. The drop came as shares of its biggest competitor, Seattle-based Starbucks Corp., fell by 28%--its steepest drop ever. The downturn came after the company said that investments in its Internet ventures will cut into profits this year.

“I think the Starbucks thing also created a bit of a downdraft and the coffee business people got knocked around a bit,” Martin said. “I would think as this thing settles down in the next week or so, we’ll see whatever its true level will be.”

Coffee People owns the Coffee People and Coffee Plantation chains of coffeehouses in Oregon and Arizona and the 281-outlet Gloria Jean’s coffee retailing chain.

Martin said the 15 Coffee Plantation coffeehouses in Arizona are expected to be converted into Diedrich’s about three months after the acquisition is finalized. Coffee People stores are not expected to under go a name change, while Diedrich’s coffee items will be available in the Gloria Jean stores, which primarily are located in shopping malls.

Coffee People shareholders will receive $23 million in cash and 1.5 million shares of Diedrich Coffee common stock.