There's just no stopping the insanity at Green Mountain Coffee Roasters (NASDAQ:GMCR). The java junkie continues to raise its bidding card in its pursuit of Diedrich Coffee (NASDAQ:DDRX), and now things are just getting ridiculous.
Green Mountain offered an enhanced bid of $35 a share in cash last night, easily topping the current Peet's Coffee (NASDAQ:PEET) offer of $32.50 a share in stock and cash.
This bidding war began nearly a month ago, when Peet's announced that it would buy Diedrich for $26 a share. Green Mountain then stepped in with a $30 buyout proposal. After volleys of $32 in cash and stock, $32 in cash, and $32.50 in cash and stock, Green Mountain is once again the top bidder at $35 in Green green.
Diedrich has been one of the biggest winners during this market rally. The stock was trading for as little as $0.21 a share back in March. However, Diedrich's success with its K-Cup portion packs for Green Mountain's Keurig coffee makers have generated explosive profitability.
I can't be the only one wondering why Green Mountain is so hot for a company it's already profiting from. Green Mountain makes money two ways through its Keurig empire. It can buy coffee from leading brands and have them packaged into K-Cups, or it can license the process and collect a few pennies for every K-Cup sold by a third-party beanery. That won't change if Peet's owns Diedrich. If anything, it may be a way for Peet's to hop aboard. Starbucks (NASDAQ:SBUX) and Peet's are just a few of the big-name no-shows to the K-Cup party so far.
Green Mountain can have Diedrich if it wants to. It has the liquid resources to keep raising its all-cash offer. Peet's has to go the cash and stock route, and the stock takes a hit whenever it raises its bid.
Diedrich would look good on Peet's arm. It was a penny stock eight months ago, but Diedrich's Coffee People and namesake K-Cups are selling briskly these days. Green Mountain continues to expand its Keurig empire. Wal-Mart (NYSE:WMT) became a distributor this year. Jarden's (NYSE:JAH) Mr. Coffee and Conair's Cuisinart will begin rolling out new coffee makers that require K-Cup refills next year.
Peet's can't ignore the K-Cup revolution, but it certainly doesn't need Diedrich to give it a go. Like a pesky dog gnawing on a mailman's foot, Green Mountain isn't going to let go of Diedrich. Peet's needs to recognize this and bow out before it embarrasses itself. Let Green Mountain be the one to face its other K-Cup partners with the conflict of interest that deal may represent.
What do you think of the K-Cup revolution? Share your thoughts in the comment box below.
