Because Starbucks coffee isn't finished running every decent coffee company into the ground, the caffeinated behemoth is in talks to buy Northern California-based Peet's. The two have been quietly dating for months, but the relationship recently grew serious with the two companies now considering marriage. Peet's stock closed up 9.4% at $46 on Tuesday, upon news of the potential merger.
Good for business, bad for coffee drinkers. We expect to see more coffees that are wildly over-roasted to mask low quality, under-ripened beans. All hail the (further) slide toward mediocrity.
Valued at $26 billion and with over 10,000 stores in the United States, Starbuck's is the alpha in this relationship. Peet's, in comparison, has 192 retail stores and is valued at $589 million.
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Analyst Steve West tells Reuters the big growth area is the grocery business:
"What can Starbucks do with Peet's business in the next 2 to 3 years? They can probably double or triple it," West added.
Peet's is itching to get into the single-cup coffee market, according to Reuters. In early 2010, the company lost a takeover battle with Green Mountain for Diedrich Coffee, which makes coffee for Green Mountain's Keurig machines.
The news was first reported by dealReporter, a paid, online publication that delivers news about mergers and acquisitions to clients in the equity and fixed-income markets.