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Issue Date: Vol. 46, No. 5, May 2006, Posted On: 5/15/2006

Green Mountain Acquires Remaining 65% Of Keurig

Tim Sanford

WATERBURY, VT — Green Mountain Coffee Roasters Inc. announced executing a definitive agreement for it to acquire all the outstanding shares of Keurig Inc. that the company does not already own. Total consideration is $104.3 million. The transaction is subject to customary closing conditions.

Green Mountain Coffee currently owns approximately 35% of Keurig. After the merger, Keurig will remain headquartered in Wakefield, MA, and will be a wholly owned subsidiary of Green Mountain Coffee.

Green Mountain has signed a four-year employment contract with Keurig’s president and chief executive, Nick Lazaris, to take effect upon consummation of the merger. Lazaris and his team will continue to lead the Keurig business.

Under terms of the pact, Green Mountain will acquire all outstanding common shares, preferred shares, warrants and vested options of Keurig for $99.5 million in cash. Additionally, the company will assume currently outstanding unvested options with an aggregate value of $4.8 million to Keurig employees. The total aggregate purchase price for the outstanding shares that Green Mountain Coffee does not already own in Keurig, representing approximately 65% of Keurig, implies a total value of approximately $160 million for 100% of Keurig.

Green Mountain Coffee has enjoyed a longstanding relationship with Keurig and its management team. It first invested in the business in 1996 (see VT, June 1997) and has watched Keurig grow into a leading premium, single-cup brewing system in both the office and at-home distribution channels. Keurig’s financial highlights for its audited calendar year 2005 include an increase in net sales of 66% to $61 million.

Green Mountain Coffee currently represents more than 60% of Keurig’s total “K-Cup” sales. Keurig’s other North American “K-Cup” brand partners include Diedrich/Gloria Jean’s, Timothy’s, Van Houtte, Celestial Seasonings, Bigelow, Twinings and Tully’s.

Since one of Keurig’s differentiating features is its brand diversity, offering over 100 varieties of K-Cups, both Keurig and Green Mountain Coffee remain committed to Keurig’s multi-brand strategy.

In addition to being firmly established as a leader in office-based single-cup brewing choices, Keurig is quickly establishing leadership in at-home sales. Keurig brewers are currently sold in more than 5,000 retail locations including Macy’s, Filene’s, Bloomingdale’s; Dillard’s; Marshall Fields, Target, and Bed, Bath & Beyond.

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