Diedrich agreed on Nov. 2 to sell itself to Peet's Coffee and Tea (PEET), the java chain that is said to have inspired Starbucks (SBUX). But now Peet's has competition from Green Mountain Coffee Roasters (GMCR), owner of Keurig, the maker of the machine that brews Diedrich's cups.
Determined to consolidate its position as the top bean in the fast-growing business of selling coffee in "K-cups," Green Mountain offered $30 in cash for Diedrich, some 15.4% above Peet's offer of $26 and half again as much as it was trading for before Peet's initial offer.
Peet's parried, upping its bid to $32 in cash and stock.
"Peet's does have a sense of urgency to enter the fast-growing single cup market, and Diedrich probably is its only reasonable opportunity," Roth Capital Partners analyst Anton Brenner wrote in a note to clients.
That means bidding could go even higher if Green Mountain decides to raise its price, even though the period set aside in the deal with Peet's for Diedrich to entertain other offers was set to close Monday afternoon. (It's also questionable how much force that deal's restrictions still have, given the eruption of a bidding war, Brenner added.)
Green Mountain Aims to Be King of the Hill
Green Mountain CEO Lawrence J. Blanford expressed confidence in his company's offer.
"We believe our offer provides Diedrich shareholders with a substantial all-cash premium as well as greater value and greater certainty than the cash and stock proposal from Peet's," he said in a statement.
If Green Mountain's bid is successful, it will be the latest -- and richest -- in a string of acquisitions for the company. Green Mountain recently bought roasters Timothy's and Tully's wholesale operations, though not at as rich a premium as it's offering for Diedrich.
"It is increasingly clear that [Green Mountain] does not want to miss out on this chance to have greater control of the K-cup
channel," said William Chappell, an analyst at SunTrust Robinson Humphrey.
Even before Peet's and Green Mountain traded offers, Diedrich's stock has seen quite a jolt this year. As recently as late March, it was trading for 42 cents a share; it has now gained more than 9,200% this year.
Investors certainly seem to be counting on another bid. They pushed the stock above Peet's counteroffer in late afternoon trading Monday.
That's some buzz.
