Diedrich Coffee agrees to be swallowed by Green Mountain Roasters
Diedrich Coffee Inc., the Irvine coffee wholesaler, has agreed to be acquired by Green Mountain Coffee Roasters Inc.
The $290-million, or $35-a-share, merger agreement ended a nearly two-month bidding war with rival Peet’s Coffee & Tea Inc.
The bidding war started last month with a $213-million stock and cash offer from Peet’s, which dropped out Monday, leaving Green Mountain in a position to close the deal.
Green Mountain will pay Peet’s $8.5 million to terminate an earlier merger agreement with Diedrich. That deal had an option that allowed for other bids for the company.
“We are pleased to have reached this agreement with [Green Mountain]. 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,” Paul Heeschen, Diedrich’s chairman, said in a statement issued Monday night.
The battle for Diedrich was essentially a fight for control of the Irvine company’s license to make the single-use ground coffee pods that fit into the popular Keurig single-cup brewers sold in department stores and household goods suppliers such as Target and Bed, Bath & Beyond.
Green Mountain, of Waterbury, Vt., owns the Keurig brewing system patent and has been buying the handful of roasters that hold licenses to make the “K-Cup” cartridges for Keurig-style coffee makers.
Coffee sold in such pods has a much higher profit margin than other coffee. Consumers pay $20 to $24 a pound for the single-serving coffee cartridges, about double what they pay for specialty coffee in the traditional bag form, according to Peet’s.
“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,” said Lawrence Blanford, chief executive of Green Mountain.
Investors liked the deal. Green Mountain shares rose $2.43, or 4%, to close at $62.82 on Tuesday. Diedrich shares fell 47 cents, or a little more than 1%, to $34.68. Peet’s shares rose 96 cents, or 3%, to close at $31.95.
Diedrich, a Southern California coffee company since the 1970s, was one of the last two license holders that had not been acquired by Green Mountain. The other is Van Houtte of Montreal.
Peet’s, the Emeryville, Calif., roaster with a large chain of coffeehouses, wanted Diedrich’s license to make the cartridges, believing it would provide an entry into the home and office single-cup brewing market.