WATERBURY, Vt. -- Green Mountain Coffee Roasters Inc. said that it has executed an asset purchase agreement to acquire the Tully's coffee brand and wholesale business from Tully's Coffee Corp. for a cash purchase price of $40.3 million, subject to adjustment at closing. Tully's wholesale business division distributes handcrafted coffees and related products via office coffee services, foodservice distributors and more than 5,000 supermarkets located primarily in the western states.
Tully's Coffee will remain an independent company, owned by its existing shareholders and managed by its [image-nocss] existing management team, with a focus on its retail and international division assets. Tully's retail business will operate under license and supply agreements with Green Mountain. This arrangement is intended to create consistent representation of the Tully's brand while providing gourmet coffee to all customers drinking Tully's-branded coffee.
Following the completion of this transaction, Green Mountain expects to integrate approximately 70 employees from Tully's wholesale business into its Green Mountain Coffee segment. Green Mountain will sublease from Tully's the portion of Tully's manufacturing and distribution center in Seattle that is devoted to the wholesale business.
Green Mountain Coffee intends to finance the purchase through its existing $225 million senior revolving credit facility. This transaction is subject to customary closing conditions, including approval by Tully's shareholders, and is expected to close by the end of calendar 2008. Tom T. O'Keefe, chairman of Tully's, representing 10.4% of the outstanding voting shares and 20.1% of the common stock outstanding of Tully's, has agreed to vote in favor of the transaction.
Lawrence J. Blanford, president and CEO of Green Mountain, said, "Green Mountain is delighted to be adding an outstanding specialty coffee brand such as Tully's to our coffee roasting family. Tully's will provide Green Mountain with a complementary West Coast brand and business infrastructure, furthering our plans to establish the company, and its proprietary Keurig Single-Cup Brewing system, throughout North America."
He added, "Tully's wholesale sales over the past 12 months ended June 30, 2008 of $30.4 million are up approximately 35% driven by growing supermarket distribution to 5,000 doors in 20 states, primarily in the western part of the nation, and K-Cup portion pack sales. This complements our own business in these channels, which is currently largely on the East Coast. Enhanced distribution of Tully's K-Cup portion packs in supermarkets and office coffee services also presents exciting opportunities. Tully's has been a Keurig licensee since November 2005. With this acquisition, we intend to further leverage the brand's potential and aggressively grow Tully's wholesale business."
Blanford concluded, "We believe Tully's wholesale business is a compelling and strategic acquisition. It will further strengthen Green Mountain's ability to better service its customers and deliver enhanced shareholder value over time."
Waterbury, Conn.-based Green Mountain manages its operations through two wholly owned business segments: Green Mountain Coffee and Keurig Inc. Its Green Mountain Coffee division sells more than 100 coffee selections, including Fair Trade Certified organic coffees, under the Green Mountain Coffee and Newman's Own Organics brands through its wholesale, direct mail and e-commerce operations. Green Mountain also produces its coffee as well as hot cocoa and tea in K-Cup portion packs for Keurig Single-Cup Brewers. Keurig is a pioneer and leading manufacturer of gourmet single-cup coffee brewing systems for offices, homes and hotel rooms. Keurig markets its patented brewers and K-Cups through office distributors, retail and direct channels. K-Cups are produced by a variety of licensed roasters including Green Mountain and Tully's.
Members help make our journalism possible. Become a CSP member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.