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January 30, 2013 12:08 am
Hostess Brands is set sell its Twinkie brand and other cakes to private equity firms Apollo Global Management and C. Dean Metropoulos & Co, people familiar with the matter said.
The deal may be announced as early as Tuesday, although the people could not confirm the price of the offer. It would be the opening bid in the pending bankruptcy court auction of Hostess assets, which include some bakeries.
The private equity firms’ offer would be a “stalking horse bid”, which other potential bidders will have to top.
Private equity firms are sitting on billions of dollars of so-called “dry powder”, undeployed capital that they are eager to invest. Hostess, with its strong household brands and the potential to streamline operations and reduce costs, makes an appealing target.
Founded in 1930 and made famous by its iconic if unhealthy products such as Wonder Bread, Twinkies and Sno Balls, Hostess filed for bankruptcy last year as it faced rising sugar and flour costs, and unsustainable benefits costs.
A move to trim pay and benefits led its bakers union to go on strike. When a final round of negotiations ended in stalemate, Hostess announced it would carry out plans to liquidate the company.
The decision in November to shut down and sell its more than 30 brands and three dozen plants is expected to bring more than 18,000 job losses.
Hostess’ bread brands have also attracted great interest. Flowers Foods, the Georgia-based maker of Nature’s Own bread, is offering up to $390m for six Hostess brands, including the iconic Wonder Bread, along with 20 plants and 38 depots.
On Monday, Hostess picked the makers of Little Debbie as the lead bidder for its Drake’s cakes line, according to a US bankruptcy court filing. The $27.5m cash bid by McKee Foods, based in Tennessee, also includes equipment, but not the Drake’s bakery in New Jersey.
The company also said it had picked United States Bakery as the lead bidder for its Sweetheart, Eddy’s Standish Farms and Grandma Emilie’s bread brands. That $28.9m offer includes 14 depots, four bakeries and equipment.
All three are also stalking horse bids – a judge must approve any final sales.
Hostess said in its filing that it had received a single bid that covered “substantially all” of its assets, but that it was not as high as combined total of bids for individual brands.
Additional reporting by Dan McCrum
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