March 15, 2011 8:24 pm

Peet’s sees buyer interest, including Starbucks

This article is provided to FT.com readers by mergermarket—a news service focused on providing actionable, origination intelligence to M&A professionals. www.mergermarket.com
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Peet’s Coffee & Tea (NASDAQ: PEET), the Emeryville, California-based specialty coffee retailer and roaster, has had recent sale talks with Starbucks (NASDAQ: SBUX), industry sources told mergermarket.

Starbucks declined to comment for this report. Peet’s did not return multiple calls for comment.

An industry banker claiming knowledge of the situation said Starbucks and Peet’s have been “flirting” for quite sometime, but that talks have become more serious in recent months.

“I would not be surprised to see a deal by the end of the year,” the banker noted.

An industry source claiming familiarity with Starbucks’ strategy said that he “would be surprised if Starbucks didn’t buy Peet’s within the month,” citing Peet’s wholesale distribution channels, premium price point, and shared heritage as particularly attractive to Starbucks. Peet’s served as the original supplier of coffee beans to Starbucks in 1971.

A second industry banker claiming familiarity with the situation said Peet’s has been talking to industry participants over the last two months, about various forms of collaboration, including combination of businesses.

Starbucks CEO Howard Schultz spoke of an interest in more acquisitions in a recent media report, saying that the company was planning to make an acquisition in the next 12-18 months.

But not all agree. Several industry bankers discounted reports of a Starbucks acquisition of Peet’s, speculating that Starbucks was more likely to acquire a company in the food and confectionary space, as Peet’s retail operations compete too closely in the same markets with Starbucks retail outlets to provide any benefit.

Kraft (NYSE: KFT) or Nestle would make a more likely bidder for Peet’s, two of the industry bankers speculated, citing the recent loss of Starbucks coffee grocery distribution in court.

Peet’s has a current market capitalization of USD 547m, as compared to Starbucks’ market capitalization of USD 26.45bn.

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