A Big-Time Buyout in the Coffee Sector

Consolidation in the coffee market gives one player big exposure to the powerful single-serve segment.

Emeryville, California-based coffee company Peet’s Coffee & Tea (PEET) announced that it will buy high-flying Diedrich Coffee (DDRX) for $213 million, or $26 per share in cash and stock – not bad for a stock worth 30 cents a share this spring.

Diedrich has soared higher on the back of popular K-Cup single serve coffee packs, via a licensing agreement with Green Mountain Coffee Roasters (GMCR) subsidiary Keurig. Peet’s president and CEO Patrick O’Dea said, “The Diedrich acquisition represents another major strategic growth initiative for our consumer packaged coffee business.” Investors are pleased with the move, sending Peet’s shares up by over 8%.

As a whole, the Coffee Stocks Index is bucking the market with a 13% spike. The bulk of the gain is attributable to Diedrich, which based on the Index’s net asset value calculation has grown to largely dictate performance despite its peers.

Coffee house chain Caribou Coffee (CBOU) is up by 5% while sector giant Starbucks (SBUX) slips into negative territory.

Green Mountain shares are also ahead, while those of coffee products wholesaler Farmer Brothers (FARM) and micro-cap dispensed coffee maker Javo Beverage (OTC: JAVO) have turned negative.

As of this writing, the Coffee Stocks Index is the runner-up in tickerspy’s one-month performance rankings, up by 18%.

Tags: CBOU, DDRX, FARM, GMCR, JAVO, PEET, SBUX