Diedrich Coffee taps 12-year high as bidding war heats up

The sweetened offer from Green Mountain is a direct response to a boosted bid from rival Peet's Coffee & Tea (PEET), which announced on Monday night that it was raising its offer to acquire Diedrich from $32 per share to $32.50 in stock and cash. In a statement today, Peet's argued that there will likely be "significant antitrust issues" surrounding any potential merger between Diedrich and Green Mountain.

For its part, Diedrich's board considers Green Mountain's offer to be the "superior proposal." In addition to carrying a higher cash value, Green Mountain's bid will offer fewer restrictions on Diedrich's ability to continue with business as usual in the time leading up to the transaction's completion.

Meanwhile, Diedrich has bolted higher on the charts. The stock tagged a new annual high of $35.35 in morning action, marking its best price since December 1997. However, the shares have since backpedaled to rest closer to $35, suggesting that traders might be expecting the latest Green Mountain bid to be the final word in the bidding war.

However, we probably won't know for sure until the end of the week, at the earliest -- Peet's said it will take "the next few days" to ponder its next step.

Elizabeth Harrow is a senior equities analyst and financial writer in the research department at Schaeffer's Investment Research. She is featured in the video series Schaeffer's Daily Q&A on SchaeffersResearch.com.