Who Will Take the Cakes?
Published in CSP Daily News
Apollo, Metropoulos, Hurst among contenders for Hostess nonbread brands
NEW YORK -- A team of private-equity firms, Apollo Global Management LLC and C. Dean Metropoulos & Co., has emerged as a leading contender to make an opening bid for most of Hostess Brands Inc.'s cakes business, people familiar with the negotiations told The Wall Street Journal.
The buyout shops are vying against other suitors to bid on the bulk of the cakes business--which includes Hostess Twinkies, HoHos, Ding Dongs and Dolly Madison Zingers, among others--in a bankruptcy-court auction, the people said. Hostess plans to sell its Drakes brand separately, the people added.
Hurst Capital, a fledgling private-equity firm run, is also in discussions about making an opening bid for Hostess's cake brands, the people said.
The amount of any opening bid for Hostess's cakes hasn't been determined and remains fluid, people familiar with the discussions said. Hostess hopes the cake assets will fetch more than the company's bread assets do at auction, one of the people said. Flowers Foods Inc. reached a deal with Hostess earlier this year to acquire bread assets, including Wonder Bread and Nature's Pride, for $390 million subject to higher offers.
Apollo, the giant buyout shop co-founded by Leon Black, and Metropoulos, the owner of the Pabst Blue Ribbon Beer brand, have been looking to partner on a deal. Sarasota, Fla.-based Hurst, meanwhile, doesn't have comparable financial wherewithal and has been seeking out investors to help it compete on a possible bid, according to a person familiar with the matter.
Hostess could disclose in bankruptcy-court documents the opening bid for most of the liquidating company's cakes business by mid-February, some of the people said. The auction would follow in ensuing weeks. The company is aiming to reveal the bidder by Jan. 28 but could miss that deadline, these people told the Journal.
Hostess, based in Irving, Texas, said in November it was shutting down its business and selling off its 30 or so brands and 36 plants, moves eventually expected to result in the loss of more than 18,000 jobs. The company attempted to reorganize under Chapter 11 bankruptcy protection but moved to liquidate after failing to reach a deal on cost cuts with its second-largest union, representing thousands of bakers.
Meanwhile, the Bakery & Confectionery Union & Industry International Pension Fund (Bakers Fund) said it has engaged New York distressed investment banking firm Gordian Group LLC in connection with Hostess Brands' chapter 11 cases currently pending in the Bankruptcy Court for the Southern District of New York.
"We are making every effort for our members by working to preserve their jobs and pension benefits, and assisting with the continuation of Hostess' business and operations. We are delighted to add Gordian's firepower to our advisory team," said David Durkee, president of the Bakery, Confectionery, Tobacco Workers & Grain Millers International Union and chairman of the Bakers Fund.
"Given the sale process that is underway, we believe the Bakers working with a buyer create the opportunity to increase value and are pivotal to the success of the business. Buyers should know that the Bakers are very interested in having direct discussions with them," said Gordian's president and head of restructuring and distressed M&A, Peter Kaufman.
"The Bakers are here to work with bidders in any way as our sole goal is to maximize jobs and pension benefits for our members," said Mr. Durkee. "We are looking to support and work with well-capitalized bidders."
Kaufman added, "Our mission here is a critical one, and we aim to assist the Bakers' leadership and counsel in working with interested bidders to preserve jobs, providing a seamless restart of baking operations, and achieving the best possible outcome for the Bakers' members under these difficult circumstances."