Green Mountain & Krispy Creme: A Dream Team (GMCR, KKD)

Krispy Kreme Doughnuts Inc. (NYSE: KKD) is one of those cult stocks that investors often fight over.  It has a checkered past and has had accounting issues before.  So, what happens when the CEO of Green Mountain Coffee Roasters Inc. (NASDAQ: GMCR) acquires shares?

Shares of Krispy Kreme were higher today after an SEC filing showed that Green Mountain’s founder and Chairman Robert Stiller has acquired 3,460,000 shares or some 5.125% of Krispy Kreme’s common stock. Unless something has changed, Stiller appears to now be the largest outsider holder.

Is it fair to ask if something deeper may be brewing here, no pun intended?  It is easy to merely throw out “coffee and donuts” as an explanation.  If this was setting itself for a buyout, it would be more likely that Green Mountain “the company” would have made the transaction.  Maybe it is nothing more than to cement ties or for strategy.  Maybe Green Mountain is interested in aspects of the franchise or the retail locations.

Either way, chances are that Stiller wants more here than just speculating that Krispy Kreme shares are undervalued.  You can bet that this was not his personal stock broker’s or advisor’s stock pitch.  This could have the makings of a dream team in a combination, but again there may be something besides merger interest here.  The SEC filing (SC 13G) says the shares acquired “were not acquired and are not held for the purpose of or with the effect of changing or influencing the control of the issuer of the securities and were not acquired and are not held in connection with or as a participant in any transaction having that purpose.”

Krispy Kreme shares closed up 6.5% at $6.85 today and the 52-week trading range is $2.56 to $8.14.  After today’s gain, Krispy Kreme’s market cap was $462 million.  Green Mountain Coffee shares rose 2% to $35.17 and its market cap is $about $4.7 billion.

JON C. OGG