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Originally published Monday, September 15, 2008 at 12:00 AM

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Tully's sells bulk of business to Green Mountain Coffee

Tully's Coffee agreed to sell its brand, wholesale and supply chain businesses to Green Mountain Coffee Roasters of Vermont for $40.3 million in cash. The...

Seattle Times business reporter

Tully's Coffee agreed to sell its brand, wholesale and supply chain businesses to Green Mountain Coffee Roasters of Vermont for $40.3 million in cash.

The sale requires the approval of Tully's shareholders and is expected to close by the end of the year.

After the sale, Tully's shareholders and executive management team would continue to own and operate its retail and international businesses.

"Most importantly, we believe this is an excellent opportunity for our shareholders to receive great value for the Tully's wholesale business and brand assets," Tully's Founder and Chairman Tom O'Keefe said in a release. "The sale also allows us to immediately strengthen our balance sheet by reducing outstanding debt."

The deal comes seven months after Tully's announced it had hired D.A. Davidson & Co. to "explore strategic and financial alternatives."

Tully's wholesale business distributes coffee and other products through office coffee services, food service distributors and more than 5,000 supermarkets mostly in western states.

Green Mountain expects to employ about 70 people from Tully's wholesale and supply chain business and lease an existing manufacturing and distribution center in Seattle.

Tully's postponed an initial public offering last year, citing turmoil in the stock market. It had hoped to raise about $34 million, which would have helped open new stores and repay $7 millio nin debt, among other things.

Last winter, Chief Executive John Buller and Chief Financial Officer Kristopher Galvin left the company, and Tully's laid off about 14 headquarters employees. Buller had been Tully's sixth top executive since founder and chairman Tom O'Keefe relinquished the CEO title in 2001.

Tully's has lost money for years, accumulating total losses of more than $88 million.

The company has delayed filing its 10-K, an annual report required by securities regulators, since June. In delay notifications, Tully's has said it could not gather information necessary for filing in time "without unreasonable effort and expense."

Green Mountain Coffee Roasters began in 1981 with a small café in Vermont that roasted its own coffee. The company began selling to other restaurants and launched a mail-order business for consumers. It went public in 1993 and had sales of $341.7 million for the fiscal year ended Sept. 29, 2007. Net income was $12.8 million.

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With more than 1,000 employees, Green Mountain sells whole bean and ground coffee, hot cocoa and teas, mostly to wholesale customers in the eastern U.S. In 2006, it bought a company called Keurig that sells single-cup coffee brewers and accessories. Keurig receives royalties from other coffee roasters that sell coffee for its single-cup brewers, including Tully's.

Green Mountain CEO Lawrence Blanford said in a release that Tully's "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."

Melissa Allison: 206-464-3312 or mallison@seattletimes.com

Copyright © 2008 The Seattle Times Company

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