PEET Peets Coffee & Tea, Inc. (MM)

Green Mountain Coffee Roasters Inc. (GMCR) announced that it is selling its US Van Houtte business to Aramark Refreshment Services LLC for about $145 million.

The Van Houtte business, also known as Filterfresh Business, roasts and markets gourmet coffee for home and office consumption. It distributes its products through Van Houtte’s direct-to-store delivery and coffee services networks in Canada and the U.S.

Van Houtte’s Canadian brands include Van Houtte, Brulerie St. Denis, Les Cafés Orient Express Coffee and Brulerie Mont Royal. The company also produces K-Cup portion packs for the Keurig Single-Cup Brewing System under the Van Houtte, Bigelow and Wolfgang Puck K-Cup brands.

Green Mountain had taken over the Filterfresh business from LJVH Holdings Inc for $905 million in December, 2010. However, soon after the acquisition Green Mountain decided to divest its Van Houtte’s US business. Popular as Filterfresh, the unit serves more than 71,000 offices in most major North American cities, and overlaps with Green Mountain's existing network of independent Keurig distributors in the U.S. Proceeds from the sale would be used to repay Green Mountain’s debt.

The company continued to carry on the business from Van Houtte’s headquarters in  Montreal, Quebec. Green Mountain had moved ahead with the acquisition with a desire to expand its business in Canada and and own the wide range of brands in Van Houtte’s portfolio.

Green Mountain produces coffee, tea and hot chocolate under various brands, including its namesake as well as Tully's Coffee, and Newman's Own Organics coffee. It also manufactures K-Cup portion packs.

While Green Mountain’s sound position in a prospering industry and strategic acquisitions encourage us immensely, coffee’s vulnerability to highly volatile global prices and presence of tough competitors like Peet's Coffee & Tea Inc. (PEET) and Starbucks Corporation (SBUX) are a worry.

Currently, we prefer to rate the stock as Neutral. Green Mountain holds a Zacks #1 Rank, which translates into a short-term Strong Buy rating.

 
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