Tully's sells businesses to Green Mountain Coffee

Tully's Coffee Corp. said Monday it will sell the Tully's brand and its wholesale and supply chain business to Green Mountain Coffee Roasters Inc. for $40.3 million in cash.

The deal means Seattle-based Tully's will continue to own and operate its domestic retail business, including company-owned, franchised and licensed retail store locations. Tully's will also retain control of international retail and wholesale businesses.

Tully's landmark roasting plant just south of downtown Seattle near Interstate 5 will remain open under the deal, said Roger van Oosten, a Tully's spokesman. Green Mountain, van Oosten added, will lease the facility from Tully's, but whether the giant 'T' logo at the top of the plant will be kept has not been discussed. The site formerly housed the Rainier brewery.

The sale allows Tully's to reduce outstanding debt, said Tom T. O'Keefe, Tully's founder and chairman of the board.

Tully's had been exploring its options. In February, the company said it wouldn't go forward with its planned initial public offering due to what it said was continued volatility in the market. It had also postponed the IPO from August 2007 as well. The company had planned to raise about $34.5 million from an offering of 3.5 million shares, according to regulatory filings. It said in February it would explore other alternatives to boost the company's value, including a sale.

For Waterbury, Vt.-based Green Mountain, the deal gives it a West Coast brand and infrastructure, said Lawrence Blanford, president and chief executive of Green Mountain.

The sale also leverages an existing relationship between the companies through Green Mountain's Keurig Single-Cup Brewing system. Since 2005, Tully's has been a Keurig licensee and has produced a branded line of K-Cup portion packs.

Green Mountain said it expects to add about 70 employees from Tully's wholesale and supply chain business into its Green Mountain Coffee segment. The company confirmed it will lease Tully's existing manufacturing and distribution center in Seattle. All other employees at Tully's headquarters there will continue to run the domestic retail business and the existing international partnerships, Green Mountain said.

Green Mountain also said it expects the deal to add modestly to its profit in the first year after closing. The company reiterated its fiscal 20090 profit guidance.

Tully's coffees are available at more than 500 branded retail locations. It has company-operated and franchised specialty retail stores in Washington, Oregon, California, Idaho, Arizona, Montana and Utah. The company also operates in Asia.

The sale, subject to shareholder approval, is expected to close before the end of the year.

The announcement came after the market closed Monday. Shares of Green Mountain rose $1.13, or 3.5 percent, to close at $33.60.