Peet's Coffee & Tea Inc., hoping for a stake in the growing single-serve coffee brewing market, on Monday boosted its bid for a wholesale roaster and distributor by 24 percent.
If accepted, the revised offer _ a $265 million cash-and-stock deal valued at $32 per share _ would give Peet's its first foothold in the increasingly popular market for single serve coffee pods called "K-Cups."
But Peet's offer, formally submitted Sunday evening, came hours before Diedrich Coffee Inc. said a dueling $247 million all-cash offer from Green Mountain Coffee Inc. was superior to Peet's previous $213 million bid Diedrich's board is now evaluating Peet's sweetened bid.
Meanwhile, investors sent Diedrich Coffee shares above the latest price being offered by Peet's, suggesting they think the bidding could go higher.
Both Peet's and Green Mountain are hoping for a stake in Diedrich's K-Cup business. The wholesaler is one of four companies licensed to make the single-serving coffee used in the popular Keurig Inc. brewing system, which is already owned by Green Mountain.
Keurig revenue accounted for more than half of Green Mountain's net sales through the first three quarters of this year, according to regulatory filings. Green Mountain, based in Waterbury, Vt., acquired another K-Cup licensee earlier this month for $157 million.
Meanwhile, nearly all of Diedrich's revenue comes from its sale of K-Cups. Its contract with Keurig is automatically renewed every five years the company sells a certain amount of Keurig products.
Stifel Nicholas analyst Mark Astrachan said he thinks Green Mountain will keep courting Diedrich _ despite Peet's increased offer. That's because two vital Keurig patents are set to expire in 2012 _ possibly allowing other competitors to manufacture K-Cups without paying Green Mountain a licensing fee.
"We believe Green Mountain is likely to be aggressive in pursing Diedrich to prevent increased competition in the K-Cup market, at least until the patent expires," Astrachan wrote.
If Green Mountain manages to best Peet's and acquire Diedrich, it would control about 85 percent of K-Cup sales, Astrachan told investors in a research note Monday.
Green Mountain's offer is valued at $30 per share.
But Peet's, based in Emeryville, Calif., showed no signs of backing down, either.
Under the terms of Peet's revised proposal, Peet's said it will pay $19.80 in cash and 0.321 of one share of Peet's common stock for each share of Diedrich common stock.
The value of the stock component will rise and fall with changes in Peet's stock price. In the previous offer, the stock component was based on a fixed dollar value per share of Diedrich common stock subject to a maximum of 0.315 of per share.
Shares of Diedrich, which is based in Irvine, Calif., climbed $7.66, or 29.5 percent, to close at $33.65 Monday after trading at a fresh high of $33.77 earlier in the session.
Shares of Peet's fell $4.94, or 13 percent, to close at $33.06 while shares of Green Mountain Coffee rose 43 cents to $65.44.