Dempsey's Tully's Bid Gets An Assist From Green Mountain


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If Patrick Dempsey ultimately gets the Tully’s Coffee chain for $9.15 million, he should probably send some autographed photos to Green Mountain headquarters. That’s because his victory in the auction last week came about only after the Vermont-based coffee maker—and owner of Tully’s brand name—objected to partial bids, according to sources.

One of those competing bids came from Starbucks. And the Seattle-based coffee chain, which Dempsey described in a tweet as the “green monster,” is expected to file an objection to the sale of the concept this week, in advance of a hearing set for Friday at a U.S. Bankruptcy Court in Washington.

Green Mountain has, at least publicly, been relatively quiet on the Tully’s bankruptcy, even though the Vermont-based maker of Keurig coffee makers owns the Tully’s name thanks to its 2008 purchase of the company’s wholesale operations. That apparently changed late in the day last Thursday.

That day, a half-dozen companies bid on Tully’s, starting at 9 a.m. and lasting well into the evening. Representatives from Green Mountain were there and, we were told, had been OK with the bid structures for most of the process. Some of the bidders, notably Dempsey, were targeting the entire company. Starbucks was only bidding on Tully’s best locations. And some bidders were vying for the pieces of the company that Starbucks didn’t want.

Green Mountain didn’t raise an objection all day, as the auction took the bid price well past the point at which all the creditors would get paid. But then it got cold feet with the partial bids—worried, perhaps, that it would weaken the coffee chain around which the Tully’s brand has been built. And so Green Mountain told officials that it would not approve any such bids. The auction was ended. Dempsey’s group was deemed to be the high bidder, because it wanted the whole chain.

Not surprisingly, Starbucks officials were angry. “They went berserk,” one source told us. Starbucks officials felt that the auction should be re-started so they could bid on the entire company.

As such, the coffee chain is expected to argue this week that its bid, when combined with another bid for the rest of the chain, is higher than the $9.15 million that the Dempsey group, Global Baristas, would pay. And Starbucks should also have a beef with Green Mountain’s late change of heart when it comes to partial bids.

The big question is whether all of this matters. The price is high enough to pay all the creditors and leave something left over for shareholders. That’s an accomplishment in and of itself. Usually, creditors take a bath in a bankruptcy sale and shareholders are left with nothing. Tully’s is surviving thanks only to a series of credit approvals designed to provide it enough cash to operate until the sale is complete. A judge may well approve the Dempsey deal to get the sale over with. And Dempsey’s group could simply argue that it would have bid more in that case, anyway.

Then again, this is the Tully’s bankruptcy we’re talking about, a case that has already lured its founder, an actor, a chain known for scantily clad baristas and the world’s largest coffee concept. Nothing would come as a surprise at this point.

 

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