Green Mountain likely to raise Diedrich bid; Cisco expected to seek deals; CBOE mulls sale

By Cristal Cody

Tupelo, Miss., Dec. 1 - Peet's Coffee & Tea, Inc. raised its bid to $32.50 a share in cash and stock for Diedrich Coffee, Inc. to beat out rival Green Mountain Coffee Roasters, Inc., but Green Mountain has the capacity to bid much higher, an analyst told Prospect News on Tuesday.

In other situations, Cisco Systems Inc.'s tender offer, which was extended until Thursday, for shares of Norwegian video conferencing firm Tandberg ASA should be completed, an analyst said in an interview.

Cash-heavy Cisco also is expected to continue to hunt for other transactions, the analyst said.

Also on Tuesday, the Chicago Board Options Exchange was in the news with potential plans for a sale or an initial public offering, though one analyst said such a move is likely months away.

Meanwhile, equities continued to advance to send the Dow Jones Industrial Average up 126.74 points, or 1.23%, to 10,471.58.

The Standard & Poor's 500 index gained 13.23 points, or 1.21%, to close at 1,108.86, and the Nasdaq Composite index climbed 31.21 points, or 1.46%, to 2,175.81.

Peet's grinds out new bid

Late Monday, Peet's said it would pay 0.321 of a share and a range of $21.26 to $22.87 in cash to equal $32.50 a share for Diedrich, an Irvine, Calif.-based specialty coffee distributor and one of four licensed producers of K-Cups for Keurig Inc.'s single-cup coffee maker.

Peet's earlier offer included cash and stock that valued the company at $30.35 a share.

Green Mountain has offered $32.00 a share in cash and likely can bid much more, Scott Van Winkle, an analyst with Canaccord Adams Inc., told Prospect News on Tuesday.

"They can go significantly higher. They have plenty of capital, and they can make the acquisition at a higher level and it still be financially attractive to earnings," Van Winkle said.

The deal would be a "nice bolt-on acquisition that's financially lucrative" for Green Mountain, he said.

"I do think they should be aggressive in getting this acquisition," Van Winkle said. "It's very incremental to earnings. It gives them more flexibility, more brands and more geographic opportunities."

Emeryville, Calif.-based Peet's said in a statement that it could close the deal before the end of the year, while Green Mountain said it could close the acquisition in early 2010.

Peet's plans to finance the cash portion of the acquisition through cash on hand at both companies and $175 million of committed debt financing from Rabobank Nederland.

Waterbury, Vt.-based Green Mountain said in a statement Tuesday that it's committed to the transaction and is evaluating the company's "next steps."

Diedrich said in a statement Tuesday that the board is analyzing the two takeover offers.

The company had struck a deal with Peet's on Nov. 2 to be acquired for $26.00 a share in cash and stock until Green Mountain entered the bidding.

Diedrich's stock closed Tuesday up 85 cents, or 2.57%, at $33.97.

Peet's shares rose 22 cents, or 0.68%, to $32.78.

Green Mountain's shares fell 94 cents, or 1.49%, to $62.04.

Cisco sits on cash pile

Cisco said Tuesday that it extended the offer period for Tandberg's shares until Thursday.

The offer, valued at more than $3.3 billion, was scheduled to expire on Tuesday.

In November, San Jose, Calif.-based Cisco increased the cash bid to 170 Norwegian kroner a share, up from an initial bid in October of 153 kroner a share that had been rejected by about 30% of shareholders.

Bill Choi, an analyst with Jefferies & Co., said in an interview on Tuesday that the offer should attract more holders this time.

"The shareholders who were initially balking at the original offer have agreed to sign on, plus you have the internal management and key shareholders that had previously agreed," he said. "It's largely a done deal. They're just giving everyone time to tender their shares."

Once that acquisition is complete, Cisco is expected to seek additional transactions.

"Cisco is certainly talking about continuing additional M&A," Choi said. "They're back to having cash of about $35 billion. We are seeing consolidation in technology companies so there's still the potential for bigger deals, but most of the deals are probably going to be smaller, private companies."

Cisco shares gained 52 cents, or 2.22%, to end at $23.92 on Tuesday.

Tandberg shares rose 0.06% to 161.40 kroner.

CBOE considers sale

The Chicago Board Options Exchange, the largest U.S. options exchange, reportedly reached a settlement with the Chicago Board of Trade that had been a block to the exchange's demutualizing.

"While the ball is rolling towards demutualization and a potential IPO and/or sale, the demutualization process is likely to take months as there will need to be an owners' vote and there still appear to be issues which divide some members," Chris Allen, an analyst with Pali Capital Inc., said Tuesday in a research note.

The exchange agreed to pay $4.2 million to settle a suit with the Chicago Board of Trade over its equity stake.

Chicago-based futures exchange operator CME Group Inc. and NYSE Euronext, Inc., which runs the New York Stock Exchange as well as futures and options markets, have been cited as potential acquirers.

Allen said there could be compelling synergies for CME, but "as for NYX as a potential suitor, the company already has two option platforms, PCX and Amex, so we are not sure we would see the logic in pursuing a third platform. Given the increasingly competitive nature of the options business, with new players such as BATS launching platforms, we think purchasing market share would be a losing proposition for NYX."

The Chicago Board Options Exchange likely has a deal value of up to $2.3 billion, Allen said.

"We believe a valuation for CBOE would fall in the middle of cash equities and futures exchanges and likely more towards the low end given the increasing competitive pressure in the space," Allen said.

CME shares added $2.62, or 0.80%, to $330.85, while NYSE Euronext shares closed unchanged at $25.28 on Tuesday.

Mentioned in this article:

Cisco Systems, Inc. Nasdaq: CSCO

CME Group Inc. Nasdaq: CME

Diedrich Coffee, Inc. Nasdaq: DDRX

Green Mountain Coffee Roasters, Inc. Nasdaq: GMCR

NYSE Euronext, Inc. NYSE: NYX

Peet's Coffee & Tea, Inc. Nasdaq: PEET

Tandberg ASA Oslo: TAA

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