This excerpt taken from the GMCR 8-K filed Sep 16, 2008.
Acquisition of the Tullys Coffee Brand and Wholesale Business
West Coast Acquisition to Accelerate GMCRs Geographic Expansion Plans
Company Intends to Leverage Full Potential of Complementary Tullys brand to drive
Keurig® Single-Cup Brewing system penetration across North America
WATERBURY, VT (September 15, 2008) Green Mountain Coffee Roasters, Inc. (NASDAQ: GMCR) announced today that the Company has executed an Asset Purchase Agreement to acquire the Tullys coffee brand and wholesale business from Tullys Coffee Corporation for a cash purchase price of $40.3 million, subject to adjustment at closing. Tullys wholesale business division distributes handcrafted coffees and related products via office coffee services, food service distributors, and over 5,000 supermarkets located primarily in the western states.
Tullys Coffee Corporation will remain an independent company, owned by its existing shareholders and managed by its existing management team, with a focus on its retail and international division assets. Tullys retail business will operate under license and supply agreements with GMCR. This arrangement is intended to create consistent representation of the Tullys brand while providing high quality gourmet coffee to all customers drinking Tullys branded coffee.
Following the completion of this transaction, GMCR expects to integrate approximately 70 employees from Tullys wholesale business into its Green Mountain Coffee segment. GMCR will sublease from Tullys the portion of Tullys manufacturing and distribution center in Seattle, WA 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 Tullys shareholders, and is expected to close by the end of calendar 2008. Tom T. OKeefe, Chairman of the Board of Tullys, representing 10.4 % of the outstanding voting shares and 20.1% of the common stock outstanding of Tullys, has agreed to vote in favor of the transaction.
Green Mountain Coffee anticipates the acquisition will be neutral to modestly accretive to its earnings per share for the first twelve months of ownership following the closing of the transaction, and accretive thereafter. Taking into account the acquisition, the Company is not changing its previously issued estimates for fully diluted GAAP earnings per share in the range of $1.20 to $1.30 per share for fiscal year 2009.
Lawrence J. Blanford, President and CEO of Green Mountain Coffee Roasters, said, GMCR is delighted to be adding an outstanding specialty coffee brand such as Tullys to our coffee roasting family. Tullys will provide GMCR 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.
Blanford continued, Tullys 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 Tullys K-Cup portion packs in supermarkets and office coffee services also presents exciting opportunities. Tullys has been a Keurig licensee since November, 2005. With this acquisition, we intend to further leverage the brands potential and aggressively grow Tullys wholesale business.
Blanford concluded, We have great admiration for the Tullys brand and commitment to the community which the founder, Tom T. OKeefe, has created. We believe Tullys wholesale business is a compelling and strategic acquisition. It will further strengthen GMCRs ability to better service its customers and deliver enhanced shareholder value over time.
Ropes & Gray LLP served as legal advisor to GMCR for this acquisition.
Conference Call and Other Investor Information on the Companys Website Green Mountain Coffee Roasters will be discussing this transaction and responding to questions on a live conference call and webcast to be held tomorrow, Tuesday, September 16, 2008. The call will take place at 8:30 AM ET and will be available, with accompanying slides, via live webcast on the Companys website at www.GreenMountainCoffee.com and other major portals. The webcast will be archived there for a period of time following the live webcast as well. The toll free live conference call dial in information for analysts and financial community to access is 877-718-5108, using passcode 4147866. For all others, a replay of the conference call will be available by telephone at 888-203-1112, confirmation code 4147866 from 11:30 AM ET on September 16 through 11:30 AM ET on September 21, 2008.
GMCR routinely posts information that may be of importance to investors in the Investor Services section of its website, including its complete financial statements, as filed with the SEC. The Company encourages investors to consult this section of its website regularly for important information and news. Additionally, by subscribing to the Companys investor alerts, you can get news directly from GMCR, via e-mail, as it is released.