LOS ANGELES -- Snack-cake maker Hostess Brands LLC has entered into a deal with Gores Holdings Inc., a special-purpose acquisition company, to introduce Hostess as a publicly listed company, with an anticipated initial enterprise value of approximately $2.3 billion.
This transaction better enables Hostess to continue executing its long-term growth plan by providing greater access to capital to fund innovation and acquisitions, the company said.
The boards of directors of Gores Holdings and Hostess unanimously approved the transaction, and they expect it to close in third-quarter 2016, subject to regulatory approval, and the approval of Gores Holdings stockholders. Upon closing of the transaction, the name of the company will become Hostess Brands Inc.
Hostess is one of the largest packaged-food companies focused on developing, manufacturing, marketing, selling and distributing fresh-baked sweet goods in the United States. It produces a variety of snack cakes, including Twinkies, CupCakes, Ding Dongs, Ho Hos, Donettes and Fruit Pies.
The Kansas City, Mo.-based company had revenues for the 12 months ended May 31 of approximately $650 million. It operates three baking facilities in Emporia, Kansas, Indianapolis and Columbus, Ga., with a direct-to-warehouse distribution system.
Hostess filed for bankruptcy in January 2012, its second in four years, and ceased production of its iconic snack cakes during the bankruptcy and sale process. Current owners Apollo Global Management LLC, New York, and C. Dean Metropoulos & Co., Greenwich, Conn., restarted production in July 2013.
Metropoulos & Co. is a merchant banking and management firm focused on the food and consumer sectors. Along with Hostess, major investments include Pabst Brewing Co., Pinnacle Foods, Aurora Foods, Stella Foods, The Morningstar Group, International Home Foods and Ghirardelli Chocolates, among others.
Along with $375 million held in Gores Holdings’ trust account, additional investors have committed to participate via $350 million private placement, led by Alec Gores, chairman and CEO of The Gores Group LLC, Los Angeles, and comprising large institutional investors C. Dean Metropoulos (via $50 million of additional rollover contribution) and Gores affiliates.
Funds managed by affiliates of Apollo and Metropoulos and family expect to hold an approximately 42% combined stake in Gores Holdings upon completion of the transaction.
Dean Metropoulos and William Toler will continue to lead the company as executive chairman and CEO, respectively.
“We look forward to continuing both our strong organic growth through unique innovations and niche, strategic acquisitions, such as our recent acquisition of Superior Baking, which will extend Hostess' consumer reach in the ‘in-store bakery’ market and expand offerings to customers,” said Metropoulos. “This new phase in Hostess' evolution and partnership with The Gores Group and our broader investor partners will continue to propel Hostess into a growing and innovative company with significant reach and potential.”
Andy Jhawar, senior partner and head of the consumer and retail group at Apollo, said, “Hostess possesses exciting continued organic top-line growth potential and is one of the highest EBITDA margin and cash-generative food platforms in the U.S.” That $2.3 billion value is 10.4x the company’s estimated 2016 adjusted EBITDA of approximately $220 million.
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