Earlier this month we covered what was then a simple buyout in the coffee market, with Peet's Coffee & Tea (NASDAQ: PEET - News) set to acquire Diedrich Coffee (NASDAQ: DDRX - News) for $26 a share.

Over the weekend, Green Mountain Coffee Roasters (NASDAQ: GMCR - News) shook things up, placing a $30 per share cash bid for Diedrich, which is a licensed producer of K-Cup single-serving coffee packs used in Green Mountain's Keurig roasters. According to a press release this morning, the board of directors of Diedrich determined the offer was a "Superior Proposal," giving Peet's until 5:00 pm Friday to renegotiate. According to the same report, Peet's subsequently upped its bid to $32 a share in cash and stock, which Diedrich is currently evaluating.

As the merger drama unfolds, investors will be keeping a close eye on the Coffee Stocks Index. Diedrich shares are soaring by 27% today after trading flat since early November on anticipation of the initial Peet's deal closing. Meanwhile, all but the latter are moving higher on a big spike for the broad market.

Green Mountain is ahead by 1.5% today while Peet's slips by -9% as the bidding war makes for a pricier acquisition than shareholders had anticipated.

Caribou Coffee (NASDAQ: CBOU - News) is soaring by 10% today while Farmer Brothers (NASDAQ: FARM - News) and sector heavyweight Starbucks (NASDAQ: SBUX - News) push higher by 2.5%.

As of this writing, the Coffee Stocks Index is one of the top-25 performing tickerspy Indexes over the last month, up by 6.3%.

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