Hostess Chooses Apollo, Metropoulos as Lead Bidder

Hostess Brands Inc., the bankrupt maker of Wonder bread, chose a joint offer from Apollo Global Management LLC and C. Dean Metropoulos & Co. as the lead bid for Twinkies and other cake brands.

Apollo and Metropoulos offered as much as $410 million for the Hostess snack-cake business, which also includes CupCakes, Ding Dongs and Ho Hos, and other assets, including five bakeries and equipment.

“Interest in these iconic brands has been intense and competitive and we expect that to continue through a robust, court-authorized auction process,” Hostess Brands Chief Executive Officer Gregory F. Rayburn said yesterday in a statement. “The stalking horse bids have set a floor of more than $850 million for the bulk of the company’s assets.”

That total value for the company is almost double officials’ 2011 estimate of $450 million mentioned at a Nov. 29 court hearing. It’s lower, though, than an estimate of about $1 billion given by financial adviser Joshua Scherer of Perella Weinberg Partners LP at another hearing that month. He said interest from 110 potential buyers was “fast and furious” and with so many potential buyers was “like drinking from a fire hose.”

Hostess seeks U.S. Bankruptcy court approval for a March 13 auction. Leon Black’s Apollo, based in New York, managed $109.7 billion in assets as of Sept. 30. Metropoulos, based in Greenwich, Connecticut, is the private-equity firm that owns Pabst Brewing Co.

Liquidating Brands

Hostess, founded in 1930, is liquidating its brands, recipes, plants and other assets after failing to reach an agreement with striking bakers on concessions to help the company emerge from its second bankruptcy.

The Bakery Confectionery Tobacco Workers and Grain Millers International Union, which represented more than 5,000 Hostess workers, went on strike in November after the company imposed contract concessions approved by U.S. Bankruptcy Judge Robert Drain in White, Plains, New York.

The union blamed management for failing to modernize and said it accepted big wage and benefit cuts as part of Hostess’s first bankruptcy, which ended in 2009. Hostess, based in Irving, Texas, entered bankruptcy again in January 2012 after changes in American diets curbed sales as ingredient costs and labor expenses climbed.

‘Legendary Products’

“We are pleased to be partnered with Apollo as we seek to resurrect Hostess Snacks and return these legendary products to the American consumer,” C. Dean Metropoulos, founder and CEO of Metropoulos & Co., said in a statement.

Hostess previously announced lead bidders for the majority of its bread brands as well as its Drake’s brand. Flowers Foods Inc., McKee Foods Corp. and United States Bakery Inc. are the so-called stalking-horse bidders, setting the standards other suitors will have to beat.

Flowers, based in Thomasville, Georgia, made the lead bid for Hostess’s Wonder, Butternut, Home Pride, Merita and Nature’s Pride brands, 20 bread plants, 38 depots and other assets. Flowers offered $360 million, plus $30 million for the Beefsteak brand. An auction is set for Feb. 28.

Flowers, established in 1919, produces and markets packaged baked goods for retail and food-service customers. The company’s top brands are Nature’s Own and Tastykake.

Little Debbie

McKee, maker of Little Debbie snacks, agreed to pay $27.5 million for Drake’s. United States Bakery offered to buy the Sweetheart, Eddy’s, Standish Farms and Grandma Emilie’s bread brands, four bakeries and 14 depots, plus certain equipment, for $28.9 million, according to court papers. Hostess has requested a March 15 auction date for Drake’s and the four bread brands.

Hostess, previously known as Interstate Bakeries Corp., exited the earlier bankruptcy under the control of buyout firm Ripplewood Holdings LLC and lenders.

Yesterday’s “approval of the stalking horse agreement is a positive step toward saving some of America’s most well-recognized and iconic brands,” Andy Jhawar, a senior partner of Apollo, said in a statement.

Under the accord, the brands to be acquired by Apollo and Metropoulos will include Hostess, Dolly Madison, Mini Muffins, Zingers and Suzy Q’s.

The case is In re Hostess Brands Inc., 12-22052, U.S. Bankruptcy Court, Southern District of New York (White Plains). The prior bankruptcy was In re Interstate Bakeries Corp., 04-45814, U.S. Bankruptcy Court, Western District of Missouri (Kansas City).

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