UPDATE: Hostess Closing Doors, Selling Brands

Published in CSP Daily News

Snack cake maker blames strike; union blames mismanagement

UPDATE: Hostess Brands Inc. today announced that it is winding down operations and has filed a motion with the U.S. Bankruptcy Court seeking permission to close its business and sell its assets, including its iconic brands and facilities. Bakery operations have been suspended at all plants. Delivery of products will continue and Hostess Brands retail stores will remain open for several days in order to sell already-baked products.

The board authorized the wind down of Hostess Brands to preserve and maximize the value of the estate after one of the company's largest unions, the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union (BCTGM), initiated a nationwide strike that crippled the Company's ability to produce and deliver products at multiple facilities.

The union blames "failed management."

"We deeply regret the necessity of today's decision, but we do not have the financial resources to weather an extended nationwide strike," said Gregory F. Rayburn, CEO. "Hostess Brands will move promptly to lay off most of its 18,500-member workforce and focus on selling its assets to the highest bidders."

In addition to dozens of baking and distribution facilities around the country, Hostess Brands will sell its brands including Hostess, Drakes and Dolly Madison, which make cake products such as Twinkies, CupCakes, Ding Dongs, Ho Ho's, Sno Balls and Donettes. Bread brands to be sold include Wonder, Nature's Pride , Merita, Home Pride, Butternut and Beefsteak, among others.

Click here to view the new Hostess Brand Information website.

IRVING, Texas -- Hostess Brands Inc.--the maker of Twinkies, Cupcakes, HoHos and Fruit Pies--among other snack and bakery brands--said that it will file a motion with the U.S. Bankruptcy Court on Friday to liquidate the entire company if enough striking employees do not return to work by 5:00 p.m. EST Thursday to enable the company to resume normal operations. The strikes were called on Nov. 9 by the Bakery, Confectionery, Tobacco Workers & Grain Millers Union (BCTGM).

"We simply do not have the financial resources to survive an ongoing national strike," said Gregory F. Rayburn, the company's chairman and CEO.

"Therefore, if sufficient employees do not return to work by 5:00 p.m. EST on Thursday to restore normal operations, we will be forced to immediately move to liquidate the entire company, which will result in the loss of nearly 18,000 jobs," he said. "It is now up to Hostess' BCTGM represented employees and Frank Hurt, their international president, to decide if they want to call off the strike and save this company, or cause massive financial harm to thousands of employees and their families."

Hostess said that it has done everything in its power to pursue a reorganization of its business as a going concern, including spending 18 months negotiating with its key constituents to obtain a consensual agreement. It has obtained the support of its largest union, the International Brotherhood of Teamsters, and its lenders. With the support of the BCTGM, Hostess believes it would successfully reorganize.

In a statement, Hurt said, ""The crisis facing Hostess Brands is the result of nearly a decade of financial and operational mismanagement that resulted in two bankruptcies, mountains of debt, declining sales and lost market share. The Wall Street investors who took over the company after the last bankruptcy attempted to resolve the mess by attacking the company's most valuable asset--its workers. They sought to force the workers, who had already taken significant wage and benefit cuts, to absorb even greater cuts including the loss of their pension contributions."

He added, "Our members know that the plans all along of the Wall Street investors currently in control of this company did not include the operation of Hostess Brands any longer than it takes to sell the company in whole--or in part--in a way that will maximize the profits of these vulture capitalists regardless of the impact on the workforce."

Click here to view Hurt's full statement.

Hostess said that if sufficient employees do not return to work by the deadline to restore normal operations, the liquidation process will unfold as follows:

  • Hostess will file a motion with the U.S. Bankruptcy Court on Nov. 16, requesting to wind down the company and sell all of its assets.
  • Hostess has requested a hearing on the motion for Nov. 19.
  • If the motion is granted at this hearing, Hostess Brands will begin to close all of its operations as early as Tuesday, Nov. 20. The closures will include the termination of all employees except small, temporary crews to clean, secure and prepare facilities and other assets for sale.

Click here for additional information about the company's labor issues.

Hostess was founded in 1930 and is based in Irving, Texas; its products include brands such as Hostess, Wonder, Nature's Pride, Dolly Madison, Drake's, Butternut, Home Pride and Merita. Hostess Brands has approximately 17,780 employees and operates 33 bakeries, 565 distribution centers, approximately 5,500 delivery routes and 570 bakery outlet stores throughout the United States.