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Peet's to extend tender offer for Diedrich: source

NEW YORK (Reuters) - Peet's Coffee & Tea Inc plans to announce on Monday it will extend its tender offer for shares of Diedrich Coffee Inc by 30 days, a person with knowledge of the situation said, signaling its anticipation that regulators could block Green Mountain Coffee Roasters Inc's deal to buy Diedrich.
In December, Waterbury, Vermont-based Green Mountain outbid Peet's, a premium coffee and tea seller, with a $35-a-share all-cash offer for Diedrich that values the coffee roaster at about $285 million.

But on January 13, the U.S. Federal Trade Commission, which is reviewing the deal on antitrust grounds, issued a second request for information -- enough for Peet's to decide that it should stay in the game and offer Diedrich shareholders the option to tender their shares to Peet's, should Green Mountain's proposal run into regulatory roadblocks, the source said.
The $26-a-share tender offer, which expired on Friday at midnight, could be extended again beyond the initial 30-day extension, the source said.
Second requests do not imply that regulators are thinking of blocking a deal, but they can delay the closing. A 2007 American Bar Association survey found that a second request adds seven months, on average, to the regulatory review process. Sometimes, regulators also impose conditions that make a combination less attractive.
Green Mountain and Diedrich have said they expect their merger to close in early 2010, despite the second request.
Peet's, which sells coffee through its retail stores, grocery chains and home delivery, had announced in November it would acquire Diedrich for $26 a share in cash and stock, seeking to enter the growing market for single-serve coffee.
Diedrich is one of few licensed manufacturers of the single-serve coffee pods, known as K-cups, that offer people a convenient way to brew coffee using Green Mountain's Keurig machines. Green Mountain owns the Keurig technology, makes the machines and issues K-cup licenses.
In recent years, Green Mountain has bought two other K-cup licensees, Tully's Coffee and Timothy's Coffees of the World. The company says on its website that the "synergy" between its coffee brands and the Keurig technology drives "significant top-line and bottom-line growth," which would explain its pursuit of Diedrich.
In late November, Green Mountain launched a bidding war against Peet's with a $32-a-share cash offer that Diedrich's board deemed "superior." Peet's then responded by sweetening its offer to $32.50 a share in a mix of cash and stock, only to be trumped again by Green Mountain, which offered $35 and sealed the deal in December. Peet's then let its $32.50-a-share offer expire, leaving its original $26-a-share offer on the table.
Peet's has previously raised antitrust concerns about the proposed merger, going so far as to retain Simpon Thacher & Bartlett attorney Kevin Arquit, a former director of the FTC's Bureau of Competition, to argue its case.
The antitrust risk in this merger would depend largely on how narrowly or broadly the FTC defines the coffee market. Peet's says its offer, although $9 lower, is preferable because it would add a competitor to the K-cup market, whereas Green Mountain would control that market if it buys Diedrich.

Posted by CBN Extra Staff on 04 Feb 2010 [07:11] | Comments 0 |