Hostess Brands Inc., the bankrupt maker of Twinkies snack cakes and Wonder Bread, won permission to sell the majority of its bread brand assets, including its Beefsteak brand, at a Feb. 28 auction.
U.S. Bankruptcy Judge Robert Drain approved bidding procedures at a hearing today in White Plains, New York. Drain also approved a 3 percent or $11.7 million breakup fee Flowers Foods Inc. (FLO) will get if it isn’t the winner. A March 5 hearing is scheduled to authorize the sale to the highest, or otherwise best bidder as determined by the court.
Flowers is offering to buy Wonder, Butternut, Home Pride, Merita and Nature’s Pride brands, 20 bread plants, 38 depots and other assets for $360 million, which may be decreased to $355 million if certain license rights aren’t included in the sale. Flowers also agreed to purchase the Beefsteak bread brand for $30 million.
Prior to the hearing, Hostess and Flowers agreed to reduce the proposed 3.5 percent or $13.65 million breakup fee, thereby resolving objections made by creditors that the fee was too high in return for agreements by Flowers to make the opening bids.
Flowers Foods, established in 1919, produces and markets packaged bakery foods for its retail and food-service customers. The company’s top brands are Nature’s Own and Tastykake.
A standoff with striking union workers triggered liquidation auctions of Hostess’s brands, recipes, plants and other assets. The Bakery Confectionery Tobacco Workers and Grain Millers International Union went on strike Nov. 9 after Drain imposed contract concessions opposed by more than 90 percent of the union’s members. The union represents more than 5,000 Hostess workers.
“Today’s hearing on the stalking horse auction procedures for key bread assets sets the ground rules for a competitive bidding process,” BCTGM International Union President David Durkee said today in an e-mailed statement.
The company hopes to file a “stalking-horse” agreement for the Drakes brand next week, a lawyer for the bakery company said. A stalking horse is the initial bidder whose offer starts- off the auction.
Hostess emerged from an earlier bankruptcy in 2009 under the control of buyout firm Ripplewood Holdings LLC and lenders. The baker, previously known as Interstate Bakeries Corp., changed its name to Hostess Brands in October of that year. Hostess sought bankruptcy protection again in January 2012.
Hostess, based in Irving, Texas, listed assets of $982 million and debt of $1.43 billion, after years of declining sales as consumers switched to healthier foods, and labor and supply costs rose.
Keith Hancock, a spokesman for Flowers, didn’t immediately respond to a request for comment on the approval.
The case is In re Hostess Brands Inc., 12-22052, U.S. Bankruptcy Court, Southern District of New York (White Plains).