What Will Be the Fate of Twinkies?

Hostess hopes to emerge from bankruptcy; Flower, Bimbo eyeing brand buy

Published in CSP Daily News

IRVING, Texas -- Bankrupt company Hostess Brands Inc., the maker of Twinkies, is in talks with potential buyers and unions as it tries to stave off liquidation of the baked goods company, reported Reuters.

"We are in active negotiations with our unions and bidders," said a company spokesperson who would not offer further details.

One source familiar with the negotiations said the outcome of talks was far from certain as any deal to sell the company would hinge on Hostess' success in resolving labor issues.

Industry analysts believe private-equity firms are likely suitors, said the report, while Hostess's brands could also be a target for food companies such as Mexico's Grupo Bimbo and U.S. baker Flower Foods Inc., which has said that it is looking for acquisitions in the industry.

"We are positioned to add new bakeries as needed, enter new geographic territories and make acquisitions as we work to build shareholder value over the long term," Flowers Foods CEO George Deese said during the Thomasville, Ga., company's quarterly conference call.

When asked if Flowers was looking at Hostess, a Flowers spokesperson declined comment to the news agency. Grupo Bimbo, which bought Sara Lee Corp's fresh bakery units in the United States last year, did not respond to Reuters' request for comment.

"Given their iconic brands, Hostess's parts are likely worth more than the whole. This could be a once in a lifetime opportunity for someone like a Flowers," Doug Ehrenkranz, managing director for consumer goods at executive search firm Boyden, told the news agency.

Hostess this month warned all of its 18,500 employees they may be laid off by mailing notices in accordance with a federal law that requires companies to give employees 60 days notice before closing a facility or ordering mass layoffs.

The firm said that process did not necessarily mean any of those events would definitely happen. Hostess has said it hopes to emerge from bankruptcy as a growing company, but its success relies on its search for new capital and labor negotiations.

Hostess will go back to bankruptcy court on June 5 for a trial on whether it can reject deals with 10 smaller unions, covering collective bargaining agreements for nearly 1,200 employees.

Privately-held Hostess's efforts to terminate collective-bargaining agreements with its two biggest unions, the Teamsters and the Bakery, Confectionery, Tobacco Workers & Grain Millers International Union, which represent about 14,000 of Hostess's 18,000 employees, have so far brought mixed results.

Bankruptcy Judge Robert Drain has said Hostess could reject some bargaining agreements with the bakers' union, but ruled against its effort to reject deals with the Teamsters.

Irving, Texas-based Hostess, which operates 36 bakeries, filed for Chapter 11 bankruptcy protection for the second time in January. Founded in 1930, it has approximately $860 million in debt. It filed its first bankruptcy in 2004, citing falling sales, rising ingredient costs, excess capacity and high labor expenses. It closed bakeries and simplified some contracts, but failed to deal with pension and health obligations.

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sweet snacks