Green Mountain Coffee Roasters (GMCR) sweetened its offer for Diedrich Coffee (DDRX) by $2 a share on Tuesday, matching a rival bid from Peet's Coffee & Tea (PEET).

Tuesday's bid comes just after Peet's raised its own offer for Diedrich, hoping to get a foothold in the wholesaler's popular and growing single-serve coffee pod business.

Green Mountain's all-cash proposal of $32 per share has a total value of $265 million. Peet's second offer a cash-and-stock bid submitted Sunday evening is also valued at $265 million.

Green Mountain said its revised offer provides Diedrich shareholders with a substantial all-cash premium and greater value.

Green Mountain's bid represents a 57% premium to Diedrich's closing stock price on Nov. 2, the last trading day before news emerged of a proposed tie-up between Diedrich and Peet's.

Diedrich said its board is considering the dueling offers.

Both Peet's and Green Mountain are hoping for a stake in Diedrich's K-Cup business. The wholesaler is one of four companies licensed to make the single-serving coffee used in the popular Keurig brewing system, which is already owned by Green Mountain.

Nearly all of Diedrich's revenue comes from its sale of K-Cups. Its contract with Keurig is automatically renewed every five years the company sells a certain amount of Keurig products.

Stifel Nicholas analyst Mark Astrachan said he thinks Green Mountain will keep courting Diedrich. That's because two vital Keurig patents are set to expire in 2012 possibly allowing other competitors to manufacture K-Cups without paying Green Mountain a licensing fee.

"We believe Green Mountain is likely to be aggressive in pursing Diedrich to prevent increased competition in the K-Cup market, at least until the patent expires," Astrachan wrote.

Green Mountain, based in Waterbury, Vt., acquired another K-Cup licensee earlier this month for $157 million. If it succeeds in its quest to acquire Diedrich, it would control about 85% of K-Cup sales, Astrachan said.

Under the terms of Peet's most recent proposal, the coffee company said it will pay $19.80 in cash and 0.321 of one share of Peet's common stock for each share of Diedrich common stock.

The value of the stock component will rise and fall with changes in Peet's stock price.