M&A

25 November, 2009

UPDATE 2-Diedrich says Green Mountain bid superior to Peet's

* Peet's says has until Nov 30 to raise offer * Peet's looks at all alternatives * Diedrich says it is willing to pay termination fees (Recasts, adds details, analyst comments, share movement)

Viraj Nair

BANGALORE, Nov 25 (Reuters) - Green Mountain Coffee Roasters Inc (GMCR.O) got an upper hand in the bidding war for Diedrich Coffee Inc (DDRX.O) Wednesday after Diedrich said Green Mountain's enhanced offer is superior to Peet's Coffee & Tea Inc's (PEET.O) bid.

Diedrich said it intends to terminate the merger agreement with Peet's by paying a fee unless the latter amends its offer of $30.35 per share, based on Peet's closing price Tuesday.

Separately, Peet's said it will consider all alternatives and take the action in the best interests of its shareholders over the next several days.

"Peet's offer did not come close to Green Mountain's offer as far as cash of $32 a share, that is a point that will be very hard for them to cross, or come close to," Oppenheimer & Co analyst Matthew DiFrisco said by phone.

A legal wrangle is also unlikely as Peet's is covered through the termination fees, DiFrisco said.

Diedrich is required to pay Peet's a termination fee of $8.5 million if their deal falls through.

Diedrich said Peet's has until Friday to negotiate an amendment in the current merger agreement.

However, Peet's said that it has the right to revise its offer until Nov. 30 under the terms of its existing deal.

Analyst DiFrisco said Peet's could turn to instant coffee instead of trying to enter the much smaller single-cup brewer market.

On Tuesday, Green Mountain raised its all-cash offer for Diedrich by $2 a share, overshadowing the sweetened bid from Peet's. [ID:nBNG501200]

Green Mountain said its offer also includes a commitment to pay $8.5 million to Diedrich if a merger agreement with Green Mountain is to be terminated at a later stage.

Peet's shares were up 2 percent, while Diedrich and Green Mountain shares were 1 percent each in midday trade Wednesday on Nasdaq. (Reporting by Viraj Nair; Editing Gopakumar Warrier) ((viraj.nair@thomsonreuters.com; within U.S. +1 646 223 8780; outside U.S. +91 80 4135 5800; Reuters Messaging: viraj.nair.reuters.com@reuters.net))

Source: http://www.reuters.com