According to Bloomberg News, Hostess Brands, headquartered in Irving, Texas, confirmed late Monday that no additional viable offers for a batch of cake brands, including the iconic Twinkies, Ding Dongs and Snoballs, had been received prior to the 5 p.m. deadline Feb. 11. That news came, despite rumors which began circulating over the weekend that there was interest expressed by one of the company’s private equity debt holders, as well as renewed interest and a forthcoming offer from Hurst Capital of Florida.
An auction for the package of former Hostess brands and other assets, scheduled for March 13, has been canceled, and it appears that the $410 million “stalking horse” bid submitted by C. Dean Metropolous & Co., and Apollo Global Management, Inc., will be approved. The date for final acceptance and court confirmation of the winning offers has been set for March 19, clearing the way for the new owners to begin their tasks of reviving the various baked goods.
The bankrupt Hostess Brands shuttered its operations in November 2012, and began its liquidation process supervised by New York Bankruptcy Judge Robert Drain. The action was necessary, said the company, following a "crippling strike" by its bakers union.
One final auction is set for Friday, March 15. Family-owned Franz Bakery, also known as United States Baking Co., of Portland, Ore., submitted a bid of $28.85 million for the Sweetheart®, Eddy's®, Standish Farms®, and Grandma Emilie's® bread brands, four bakeries, and 14 depots, plus certain equipment. McKee Foods Corporation has agreed to pay $27.5 million for the Drake's® brand and certain equipment. Drake's® products include Ring Dings, Yodels, Devil Dogs, Yankee Doodles, Sunny Doodles, and Drake's Coffee Cake , according to a press release from Hostess Brands. No competing offers for either of these groups of assets have been announced.
To date, two bids have been accepted in the Hostess liquidation proceedings: Flowers Foods of Thomasville, Ga., won the majority of the company’s breads. Hostess confirmed, “That agreement includes, in addition to the brands, 20 bakeries, 38 depots and other assets. The purchase price consists of $355 million in cash which will be increased to $360 million if certain license rights are included in the sale.” Then, in a surprise offer at the only auction held so far, Mexican giant Grupo Bimbo outbid Flowers by $1.9 million for a separate acquisition of the Beefsteak brand.
However, the path to closing for the new owners may not be easy. Separate objections have been filed with the Bankruptcy Court by the bakers union and by a U.S. District Attorney. The Bakery, Confectionery, Tobacco Workers and Grain Millers International Union (BCTGM) claims that the sales offer no protection for the workers who lost jobs in the shut-down. The BCTGM had offered to work with potential buyers, noting that their members are needed in order to begin, once again, producing the baked goods. They also noted that Flowers has union agreements in effect in some of its operations.
The other objection charges that the sales to Flowers and Bimbo would “diminish or eliminate the government’s ability to enforce generally applicable police and regulatory statutes and regulations, and diminish or eliminate the buyer’s and debtor’s obligations to comply with environmental, health and safety laws,” said U.S. Attorney Preet Bharara, as reported by Bloomberg News on March 4.
In yet another court action involving Hostess, it was disclosed last week that Hostess Brands itself filed suit against Kroger, claiming that the grocery chain owes $2.8 million on overdue unpaid invoices. At one point, it was thought that Kroger might be a potential bidder for some of the company’s brands.
Current Hostess CEO Gregory Rayburn, in an interview last week, said that the current bids, which total approximately $860 million, account for the bulk of the company’s large assets. He noted, however, that the company could be expected to claim perhaps another million dollars from the sales of the remaining equipment and small assets. It was estimated that the procedure would take approximately a year to complete. Rayburn, however, said that he hopes the major sales can be finalized in April, and that his job would then be essentially complete. He was brought in to be a “restructuring expert” when Hostess filed for Chapter 11 (reorganization) bankruptcy protection in January 2012.
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