Actor Patrick Dempsey's investment group agreed Thursday night to pay $9.15 million for Seattle-based Tully's Coffee.
Actor Patrick Dempsey’s investment group agreed Thursday night to pay $9.15 million for Seattle-based Tully’s Coffee.
“We met the green monster, looked her in the eye, and … SHE BLINKED! We got it! Thank you Seattle!” Dempsey tweeted shortly after a 13-hour auction for Tully’s ended just after 10 p.m. Thursday.
The “green monster” is Starbucks, which sources said had bid for just half of Tully’s 47 stores.
Dempsey’s group will buy the whole chain, which employs about 500 people. The sale also includes Tully’s franchise rights, which several months ago included roughly 70 franchisees and licensed partners. It is unclear what will happen to those stores.
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Of the $9.15 million, about $2 million is in liabilities; the rest is cash, according to a source who spoke on condition of anonymity.
If a bankruptcy court judge approves the acquisition on Jan. 11, the deal is expected to close by the end of the month.
Dempsey plays Dr. Derek Shepherd (aka “Dr. McDreamy”) in “Grey’s Anatomy,” set in a fictional Seattle hospital.
The sale marks a new chapter for Tully’s, which has about 500 employees and has struggled for years with profitability and debt.
“We need to be able to keep this company operating, and this is the best option for us,” CEO Scott Pearson said in October, when the retail chain filed for bankruptcy protection.
Begun 20 years ago, Tully’s posted profits for just two fiscal years, 2006 and 2009. The former included a large gain from the sale of the rights to operate Tully’s stores in Japan, and the latter included the $40.3 million sale of the Tully’s roaster and wholesale business to Green Mountain Coffee Roasters in 2009.
The Green Mountain deal also alleviated the enormous debt that plagued the company, but Tully’s remained low on cash.
The bankruptcy filing shows Tully’s has assets of $5.9 million and liabilities of $3.7 million, much of it owed to vendors such as Aramark for uniforms and Green Mountain for coffee.
Tully’s founder, local real-estate developer Tom Tully O’Keefe, once said he wanted Tully’s to “drag off of” Starbucks’ education of consumers about gourmet coffee. But it could not match Starbucks’ business success.
While Starbucks opened thousands of stores around the globe, Tully’s fought to turn a profit. The company grew quickly — by 2000, it had 75 company-operated stores and 851 employees — but it never gained the efficiencies Starbucks enjoyed in what remains a low-margin business.
Tully’s also spent big on marketing, paying more than $1 million in the late ’90s to serve coffee at Safeco Field, beating out longtime Mariners’ sponsor Starbucks. For $1.8 million, it struck a marketing deal at the San Francisco Giants’ ballpark.
Around that time, Tully’s was counting on an initial public offering of stock to raise funds to enable it to keep growing and marketing itself. But the dot-com bust scared investors away from IPOs just when Tully’s needed the money, leading the company to quash IPO plans.
The chain’s most recent effort to go public came in 2007, when it was stymied again by a languishing stock market.
O’Keefe retired in 2010 as Tully’s chairman and no longer sits on its board.
Other bidders for Tully’s on Thursday were Kachi Partners in Colorado, Tully’s Acquisition Group, Direct Media Systems and Big City Ventures (doing business as Coffee Group).
Bids were submitted last week to Tully’s owner TC Global, its attorneys and its unsecured creditors, but were not filed with the bankruptcy court, which means they are not publicly available.
Melissa Allison: 206-464-3312 or firstname.lastname@example.org.