Coffeehouse Chain Won’t Buy Diedrich : Retailing: Orange County company’s president cites difference in growth philosophies.

COSTA MESA —  Canada’s largest chain of coffeehouses said Friday that it has called off its plan to acquire Orange County’s Diedrich Coffee for as much as $6 million in cash and stock.

Second Cup Ltd. in Toronto said it decided during a review process that “it would not be in the best interest of the Second Cup shareholders to proceed with the transaction at this time.”

Second Cup, which has been pushing an aggressive growth strategy in the United States, also fired Louis Basile as president and chief operating officer of its U.S. operation, Coffee Plantation in Phoenix, citing “differences regarding the company’s U.S. direction.”

The proposed acquisition of Diedrich, announced Oct. 26, hinged partly on a review of growth strategies of Diedrich and Second Cup, said Steven Lupinacci, Diedrich’s president. The review was important, he said, because the deal involved mainly stock, and the privately held, family-controlled Diedrich chain of coffee shops needed to know what kind of say it would have in the combined operation.

“We came to the conclusion that we did not have as common an idea of what we wanted to accomplish,” Lupinacci said. “We looked at our company and culture. It’s a family company that wants to grow slowly. It’s a fragile structure. Second Cup wanted to grow faster than we did. When we talked about it, we decided we were not ready for a very accelerated growth.”

Second Cup has big growth plans for Coffee Plantation, which would have moved its headquarters to Orange County after taking over Diedrich. The Canadian company said previously that it wanted the Diedrich-Coffee Plantation unit to open a dozen stores in California, Arizona and Texas by next June and at least 20 more in the Southwest by mid-1996.

Diedrich has 200 employees at eight locations in Orange County serving gourmet coffee. Second Cup, with 2,750 employees in all, operates 200 stores in Canada and, through Coffee Plantation, five in Arizona.