Just about a year ago, the shares of Diedrich Coffee (DDRX) were trading around 30 cents. Since then, it's been an incredible ride as the shares have reached $33.
Over the past month, Diedrich Coffee has actually been the target of a heated buyout battle from Peet's Coffee & Tea (PEET) and Green Mountain Coffee Roaster (GMCR). In fact, Monday Peet's upped its bid to $32 or $265 million. Investors think the bidding is not over, though.
Diedrich has a storied past, which goes back to a coffee plantation in Costa Rica in 1916. A German heiress -- Charlotte Diedrich -- was able to make a success out of it. Eventually, the company moved to Orange County, Calif.
The secret to the success of Diedrich? Simply put, it has great specialty coffees.
But is the company really worth more than $265 million?
On its own, the answer is probably no. But as a part of a larger organization, such as Peet's, a deal does make some sense. For example, the company has a sophisticated infrastructure platform -- called freshness-sensitive direct store delivery (DSD) -- that allows for efficient distribution to grocery stores. Peet's also has a chain of 188 locations across the country.
What's more, Peet's will get Diedrich's single-cup coffee business, which is growing rapidly.
Tom Taulli is the author of various books, including The Complete M&A Handbook
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Reader Comments (Page 1 of 1)
11-23-2009 @ 12:51PM
Iridium said...
but none of that justifies the current share price of Diedrich. If you look at the charts it seems that Diedrich became a victim of leveraged computer trading. Great for anyone that owned shares of the company. Maybe Diedrich is one reason why Goldman's profits were so high.
I can't figure out any type of coffee euphoria that could drive a stock up 9000% in a year, pure insanity. It makes coffee look like Dutch tulips.
I wonder if analysts will call Diedrich stock a buy trading at 109 times earnings. God this is everything that is wrong with the stock market. Institutional investors that bought the stock under a dollar cheer this kind of thing showing how the market can make millions on a small bet. But the gains are unjustifiable and only shows the absolute insanity of Wall Street.