Diedrich Coffee Inc said it determined Green Mountain Coffee Roasters Inc's enhanced offer is superior to Peet's Coffee & Tea Inc's bid.
Diedrich said it intends to terminate the merger agreement by paying a fee unless Peet's amends its offer.
The company said Peet's has until Friday to negotiate an amendment in the current merger agreement.
However, in a separate statement, Peet's said it has the right to revise its offer until November 30 under the terms of its existing merger agreement with Diedrich.
On Tuesday, Green Mountain raised its all-cash offer for Diedrich by $2 a share, overshadowing a sweetened bid from rival Peet's.
Peet's Chief Executive Patrick O'Dea said, Over the next several days we will consider all our alternatives and take the action we deem to be in the best interests of Peet's shareholders.
(Reporting by Viraj Nair in Bangalore;; Editing by Vinu Pilakkott)