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Should Starbucks Buy Peet's Coffee?

(Starbucks'(SBUX - Get Report) rumored takeover of Peet's Coffee(PEET) report updated with CEO Howard Schultz' ambitious goals to grow the company's grocery business more than tenfold.)
SEATTLE ( TheStreet) -- Peet's Coffee & Tea (PEET) shares gave up some of their recent gains Tuesday as rumors continued to circulate that Starbucks (SBUX - Get Report) could be looking to take it over. The specialty coffee roaster and retailer saw its share plunge earlier in March after news broke that Starbucks and Green Mountain Coffee Roasters (GMCR) announced a long-anticipated partnership, leaving Peet's out of the lucrative deal.

Peet's shares fell 2.5% to $47.80 Tuesday afternoon but remain nearly 13% higher than the opening price on March 15, the day takeover rumors first began in earnest. The stock had plunged 11.4% on March 10, the day Starbucks and Green Mountain announced a deal in which Starbucks and Tazo tea-branded K-Cup portion packs will be available for Green Mountain's popular Keurig single-cup brewing systems later this year. Investors were clearly disappointed that Emeryville, Calif.-based Peet's had been left out of the profitable partnership.

Reports began circulating on March 15 that Peet's and Starbucks recently held talks to discuss a potential sale. Details remained limited but Starbucks CEO Howard Schultz has indicated the Seattle coffee giant would look to make an acquisition, likely sometime this year.

"Though there have been no reports of any formal announcements regarding any merger or acquisitions from either companies, the analysts and industry sources claiming familiarity with Starbucks anticipate the takeover of the Emeryville, Calif.-based Peet's specialty coffee retailer and roaster by Starbucks," noted Zacks Equity Research.
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