Emeryville, Calif., Nov. 2 - Peet's Coffee & Tea, Inc. and Diedrich Coffee, Inc. announced today that they have entered into a definitive agreement under which Peet's will acquire Diedrich in a cash-and-stock transaction valued at $26.00 per share or a total value of approximately $213 million.
The acquisition will further solidify Peet’s leading position in the specialty coffee and tea market, with premium quality brands in every segment of the category.
With this acquisition, Peet’s will enter the rapidly growing single cup coffee market with strong specialty coffee brands helping to drive household penetration of the K-Cup brewer system by leveraging Peet’s infrastructure and direct-store-delivery selling system. Diedrich, a wholesale coffee roaster and distributor, is almost exclusively focused on the production and sale of K-Cups® for Keurig Incorporated’s top selling single-cup brewing system through a license with Keurig. As a part of the transaction, Peet’s will acquire Diedrich’s portfolio of brands including Diedrich Coffee, Coffee People and the single serve rights to the nationally recognized Gloria Jean’s coffee brand. Peet’s will also be acquiring Diedrich’s roasting and packaging facility capable of roasting and packaging unflavored and flavored coffees, with significant current and future K-Cup production capacity.
Upon closing, Diedrich’s business will immediately benefit from the infrastructure that Peet’s has developed to support large scale, national growth of its premium quality coffees, including its freshness-sensitive direct store delivery (DSD) selling and merchandising system to grocery stores.
“Over the past 7 years we’ve built the organization, roasting plant, IT and DSD sales infrastructure to expand the Peet’s brand into homes across the country without compromising our distinctive quality and superior freshness standards,” said Patrick O’Dea, President and CEO of Peet's. “This has driven a 42% compound annual growth rate in our packaged coffee business during that time and solidified Peet’s position as the premier quality specialty coffee brand.”
“Consistent with our vision to be the gold standard specialty coffee company with leading premium quality brands in every segment of the category, we recently launched a line of premium Godiva coffees in the medium roast and flavored segments with excellent sell-in success. The Diedrich acquisition represents another major strategic growth initiative for our consumer packaged coffee business, by entering and driving adoption of the single cup segment through Diedrich’s high-growth K-Cup business,” said O’Dea.
“Together, Diedrich and Peet’s will create new growth opportunities for Diedrich’s brands and further drive household penetration of the K-Cup market,” said Diedrich chairman Paul Heeschen. “As a result, this combination benefits shareholders of both companies, customers, employees and our K-Cup business partners. Our already strong K-Cup business will accelerate under Peet’s in a way we could not achieve alone,” said Heeschen.
Upon completion, the transaction will provide Diedrich shareholders with cash, as well as the opportunity for continued ownership of an interest in the combined company through the stock component of the purchase price. The acquisition is structured as a two-step transaction consisting of an exchange offer for all of the outstanding shares of Diedrich common stock followed by a merger of a Peet’s subsidiary into Diedrich. For each share of Diedrich common stock tendered and accepted in the exchange offer or converted in the merger, Peet’s will pay a combination of $17.33 in cash and a fraction of a share of Peet’s common stock having a value (based on the trading price of Peet’s common stock over a designated period prior to the completion of the exchange offer) of approximately $8.67, but such fraction will not exceed 0.315 of a share of Peet’s common stock. Outstanding warrants and options to acquire Diedrich common stock will also be converted into the right to receive a combination of cash and shares of Peet’s common stock. Upon completion of the second-step merger, Diedrich will become a wholly-owned subsidiary of Peet’s. Mr. Heeschen and other directors and executive officers of Diedrich have signed stockholder agreements in favor of Peet’s committing to tender into the exchange offer shares of Diedrich common stock representing in excess of 32% of the total outstanding common stock of Diedrich.
The acquisition has been unanimously approved by the board of directors of each company and is subject to regulatory approval and certain other closing conditions. Peet’s will finance the acquisition through a combination of cash on hand (at both companies) and $140 million of committed debt financing. The acquisition is expected to be dilutive to earnings in 2010 and accretive thereafter. The exchange offer is currently expected to close by end of the calendar year 2009.