Peet's IPO has long-term potential despite tepid opening

NEW YORK -- Look on the bright side: Peet's Coffee & Tea isn't another optical networking company, or worse, a comatose "dot-com." In the current market, investors are likely to show renewed interest in consumer stocks.

But Peet's planned initial public offering won't be a runaway hit. The company competes in a market dominated by Starbucks, the sector icon, and fragmented by lesser-known or innumerable independent purveyors of pricey java.

Worse, Peet's is late to market and there are several proven companies that would add kick to any portfolio. Green Mountain Coffee is the up-and-comer and recently rewarded investors with a stock split. Investors may ask: Over the long haul, who needs Peet's?

Peet's Coffee & Tea is a specialty coffee roaster and marketer of branded, fresh roasted whole bean coffee sold through 58 company- owned stores in four states, specialty food stores, online and mail order as well as office and restaurant accounts.

Crowded market aside, the premise of companies like Peet's Coffee & Tea may be eroding. If the economy falters, it's unlikely that vast numbers of consumers will continue to pay close to $5 for mocha latte when they can swill a traditional cup of mud for about 75 cents.

Investors thirsting for a strong opening jolt and a quick flip of the shares to pocket a big profit won't find either in Peet's planned IPO. But it's a top-notch company run by the founders of Starbucks and looks like an attractive takeover candidate.

Peet's Coffee & Tea of Emeryville, Calif., plans to offer 3.3 million shares, including 800,000 by selling shareholders, at $10 to $14 each through underwriters led by WR Hambrecht & Co. The company's proposed Nasdaq symbol is PEET.

The deal is tentatively scheduled to be priced the week of Jan. 22.

The company plans to use net proceeds raised in the IPO to reduce debt, to open additional retail stores as well as marketing and general corporate purposes.

2001Copyright
Provided by ProQuest Information and Learning Company. All rights Reserved.