* Peet's stock rallies 9.4 pct
* Deal valued at $589 mln based on Peet's closing price
(Adds analyst comment, background)
NEW YORK, March 15 Peet's Coffee & Tea Inc
PEET.O recently held talks with Starbucks Corp (SBUX.O) about
a potential sale to the large coffee shop chain, CNBC reported,
citing a DealReporter report.
Peet's has a market value of $589 million based on the
stock's closing price of $46 on Tuesday, when it rose 9.4
percent. Starbucks is valued at over $26 billion.
The DealReporter did not say how likely a deal was between
the two, CNBC said.
Both Peet's Chief Executive Patrick O'Dea and a Starbucks
spokesman declined to comment. Rumors about a tie-up between
the two companies, which have historical ties, have been
floating around the market for months.
"It's not about the coffee shops. It's about growing the
grocery business. That's where (a possible merger) has a lot of
synergies" Stifel Nicolaus analyst Steve West said.
"What can Starbucks do with Peet's business in the next 2
to 3 years? They can probably double or triple it," West
Peet's currently trades at about 29.3 times current 2011
analysts' average EPS estimate.
The Emeryville, California-based coffee company sells
packaged coffee through retailers like Safeway Inc SWY.N and
Kroger Co (KR.N) It also operated 192 retail stores in six
states as of Jan. 3.
Starbucks last week announced a deal in which Green
Mountain Coffee Roasters Inc GMCR.O would sell Starbucks
coffee for its Keurig single-cup machines, and Starbucks would
sell the Keurig machines. [ID:nN09293414]
Their agreement was seen as a formidable challenge to
Peet's and its shares fell after the deal was announced.
Peet's, which boasts of a loyal following of coffee
drinkers called 'Peetniks,' has said it wants to get into the
fast-growing single-cup coffee market. It lost a takeover
battle with Green Mountain in early 2010 for Diedrich Coffee --
which makes coffee for Green Mountain's Keurig machines.
(Reporting by Mihir Dalal in Bangalore, Phil Wahba in New York
and Lisa Baertlein in Chicago; Editing by Richard Chang,