Flowers Foods Signs Deal for Wonder, Other Hostess Bread Brands

Published in CSP Daily News

Tastykake maker is stalking-horse bidder for non-snack cake lines

UPDATE: Hostess Brands Inc. has officially announced that it has selected Flowers Foods Inc. as the stalking-horse bidder for the majority of the assets related to the company's bread business, including the Butternut, Home Pride, Merita, Nature's Pride and Wonder brands.

The agreement includes, in addition to the brands, 20 bakeries, 38 depots and other assets. The purchase price consists of $355 million in cash (increased to $360 million if certain license rights are included in the sale). The company's remaining bread brands, as well as its snack cake business, will be sold separately.

Hostess has also selected Flowers as the stalking-horse bidder for the Company's Beefsteak bread brand. The purchase price consists of $30 million in cash for the brand. The transaction does not include facilities or additional assets.

Hostess has requested that the U.S. Bankruptcy Court for the Southern District of New York authorize the company to proceed with an auction with the two Flowers proposals as the stalking-horse bids, provided the company receives additional qualified bids. If approved, the stalking-horse bids will serve as the opening bids in the auction. The final sales will be made to the highest and best bidders at the auction, subject to court approval.

Hostess has asked the court to order that the auction take place on February 28 and that a court hearing to authorize the sale to the highest or otherwise best bidders commence on March 5. The schedule and the Flowers proposals are subject to court approval. A hearing to consider approval of the bid procedures motions is scheduled for January 25.

Hostess selected the Flowers bids after Perella Weinberg Partners, Hostess's financial advisor, conducted a bidding process that involved contacting 169 potentially interested parties, 87 of which signed confidentially agreements.

"We are pleased with the Flowers offers and look forward to a robust auction process that will allow these iconic brands to continue and to maximize value for all of the Company's stakeholders," said Hostess chairman and CEO Gregory F. Rayburn. "We also continue to negotiate with parties interested in purchasing our snack cake business and remaining bread brands and expect to select additional stalking horse bidders as soon as reasonably practicable."

THOMASVILLE, Ga. -- Flowers Foods Inc. has announced that it has signed two asset purchase agreements with Hostess Brands Inc. as the stalking-horse bidder for select Hostess assets.

One of the agreements provides for Flowers Foods to purchase the Wonder, Nature's Pride, Merita, Home Pride and Butternut bread brands; 20 bakeries; and approximately 38 depots for a purchase price of $360 million. The other agreement provides for Flower Foods to purchase the Beefsteak bread brand for $30 million.

Irving, Texas-based Hostess is in the process of selling off its iconic brands and liquidating the company after a crippling strike by its bakers union forced it to shut down in November. The Irving, Texas-based company plans to hold separate auctions for its bread and snack businesses.

The transactions are subject to a court-approved bankruptcy process being initiated by Hostess. If Flowers' stalking-horse bids are approved by the bankruptcy court, the bids would then be subject to a competitive auction process to be held several weeks from now. The company would expect to close the transactions shortly following court approval if it is selected as the winning bidder. The transactions also are subject to regulatory clearance.

Flowers Foods has previously stated its interest in acquiring certain Hostess assets should they become available.

"This agreement is consistent with Flowers Foods' long-term growth objectives to reach significantly more of the U.S. population with its fresh breads, buns, and rolls," said George E. Deese , chairman and chief executive officer of Flowers Foods. "We believe these assets would enhance our ability, over time, to provide more U.S. consumers with quality baked foods at a good value through existing and new retail and foodservice customers."

Based on the current bid price, Flowers Foods would expect the transactions to be accretive to earnings in 2013. Flowers Foods plans to finance the transactions through a mix of available cash on hand and debt.

Based in Thomasville, Ga., Flowers Foods is a major producer and marketer of packaged bakery foods for retail and foodservice customers in the United States with annual sales of more than $3 billion. Among the company's top brands are Nature's Own and Tastykake.

Flowers Foods operates 44 bakeries that produce a wide range of bakery products. These products currently are sold through a direct-store-delivery network with access to more than 70% of the U.S. population in the East, South and Southwest as well as in certain markets in California. Select Flowers products are sold nationwide through customers' delivery systems.