Hostess Deals Approved Heading Into 'Bun Season'
Wins judge's OK for Drake's Cakes, bread brand sales
IRVING, Texas -- Hostess Brands Inc. has been granted permission to sell off the last of its major cake and bread assets, raising total sale proceeds from the baking company's liquidation to about $860 million., reported The Wall Street Journal.
Judge Robert Drain of the U.S. Bankruptcy Court in White Plains, N.Y., signed off on two sales at a Tuesday hearing. McKee Foods Corp., the maker of Little Debbie snack cakes, is purchasing Hostess's Drake's Cakes brand of coffee cakes and other treats for $27.5 million. Going to a subsidiary of United States Bakery Inc. for $30.9 million are Hostess's Sweetheart, Eddy's, Standish Farms and Grandma Emilie's bread brand, plus four bakeries and 14 depots, said the report.
Both buyers served as the lead bidders for their respective pools of assets. McKee Foods' bid was unchallenged during the sale process, while U.S. Bakery was challenged at auction by a joint venture of Mexican bakery giant Grupo Bimbo SAB de CV and Hackman Capital Acquisition Co., Lisa Laukitis, an attorney representing Hostess, told the newspaper.
U.S. Bakery originally bid $28.9 million as the stalking horse for that sale.
Hostess sought Chapter 11 protection for the second time in recent years in January 2012. It tried to stage a reorganization but in November announced it was shutting down after a nationwide strike crippled its operations.
The Irving, Texas, company soon launched a bankruptcy-sale process, shopping pools of assets to a variety of suitors. Everyone from private-equity firms to regional and national competitors to former Hostess customers like grocery-store chains and convenience stores expressed interest in picking up pieces of the 86-year-old company. Ultimately, a few lead bidders emerged as stalking horses; in most cases, Hostess ended up canceling auctions and heading straight to sale hearings with the stalking horse bids in hand.
Last month, Hostess won approval for sales of about $800 million in cake and bread assets. Drain cleared the company to sell the majority of its cake brands, including Ho Hos, Ding Dongs and Twinkies, to Apollo Global Management LLC and Metropoulos & Co., two buyout firms that teamed up with an offer of about $410 million.
Flowers Foods Inc., the Thomasville, Ga., maker of Tastykakes and Nature's Own bread, picked up five major Hostess bread brands, including Wonder and Nature's Pride, for $360 million. Another bread brand, Beefsteak rye, went to Grupo Bimbo, with a $31.9 million price tag.
Many of the transactions include assets like depots, bakeries and equipment in addition to the brands themselves.
Laukitis said at the Tuesday hearing that the company was hopeful the Apollo and Metropoulos deal would close this week, according to the report. The Beefsteak sale closed last week, she said.
Laukitis, who is with law firm Jones Day, added that the purchasers whose deals were being reviewed by the court Tuesday were eager to finalize the transactions, the Journal said. U.S. Bakery, for example, was "concerned" about getting products back on shelves in time for the summer bun season, when hot dog and hamburger buns are in high demand for cookouts, she said. told the paper.
"I wasn't aware there was a bun season," Drain said, adding that he would sign off on the orders.