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Lavazza Buys Green Mountain Stake For $250M

Green Mountain Coffee?is selling a 7 percent stake to Lavazza for $250 million, and the two?plan to develop?single-serving espresso machines and espresso capsules.

NEW YORK (AP) -- For an extra jolt to its finances, Green Mountain Coffee Rosters Inc. is selling a 7 percent stake to Lavazza, Italy's best-selling espresso brand, for $250 million.

Together, the companies plan to develop new single-serving espresso machines and espresso capsules that will complement Green Mountain's popular Keurig coffee makers, which brew single cups of tea or coffee.

The deal is expected to close in September and advances both company's strategies, they said late Tuesday.

Green Mountain wants to expand its successful single-serve K-Cup lines, and Lavazza has been buying companies in India, Brazil and Argentina to fuel its growth. This is Lavazza's biggest foreign acquisition.

Lavazza, based in Turin, has agreed to buy newly issued shares at 10 cents par value common stock at a price equal to the 60-day volume weighted average price at closing, less 7.5 percent. The deal includes the possibility of buying additional shares up to 15 percent of Green Mountain.

The deal must be approved by U.S. antitrust regulators.

The companies' new single-serve products aren't expected to reach the market until at least 2013.

The Keurig system's success has been fueling growth for Green Mountain, which is based in Waterbury, Vt.

As shoppers cut spending at cafes during the recession, the systems presented a less-expensive alternative. Rival Starbucks Corp. jumped into the market in September with its Via instant coffee line.

Last month Keurig said its third-quarter revenue rose 64 percent to $311.5 million, thanks largely to rising sales of Keurig machines and accessories, which accounted for about half of the company's revenue. It expects shipments for K-Cup packs to rise as much as 76 percent this fiscal year.

Green Mountain's $300 million acquisition of Diedrich Coffee Inc. -- one of four roasters licensed to produce K-Cups -- closed in May.

The Lavazza investment will let Green Mountain make more purchases, Janney Capital Markets analyst Mitchell Pinheiro told clients in a note Wednesday. It also brings Lavazza's brand value and expertise to Keurig products and could help with launching Keurig in Europe, he said.

He reiterated his "Buy" rating on the stock and $40 price target.

Shares of Green Mountain rose a penny to $31.47 in midday trading Wednesday.