Hostess Gets Approval to Auction Twinkies, Drake’s Brands

Hostess Brands Inc. won bankruptcy court approval to hold auctions for brands including Wonder Bread, Twinkies and Drake’s.

U.S. Bankruptcy Judge Robert Drain in White Plains, New York, today approved Flowers Foods Inc., McKee Foods Corp., United States Bakery Inc., Apollo Global Management LLC and C. Dean Metropoulos & Co. as so-called stalking-horse, or lead, bidders for most of Hostess’s cake and bread brands, setting the thresholds other suitors will have to exceed. A sale hearing, to approve the highest and best bids, is set for March 19.

Hostess, founded in 1930, is liquidating after failing to reach an agreement with striking bakers on concessions to help the company emerge from its second bankruptcy. Initial bids for assets total about $858 million with about $100 million more for sale, Chief Executive Officer Greg Rayburn said Jan. 31.

Apollo and Metropoulos offered as much as $410 million for the Hostess snack-cake business, which includes Dolly Madison brands, five bakeries and equipment. 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.

Home Pride

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.

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. A March 15 auction date for Drake’s and the four bread brands has been set.

Heather Lennox, a lawyer for Hostess, told Drain that an agreement on retiree benefits was reached with four unions covering 233 former employees. Hostess will continue to provide retiree benefits to the same union retirees already receiving benefits through May 31.

Retiree Claims

The union retirees, collectively, will have a pre-bankruptcy unsecured claim against the bankruptcy estate in the amount of $7.4 million, according to court papers filed today. That claim will be divided among the unions. A hearing will be held on Feb. 21 to approve the accord.

The Interstate Brands Corp.-International Brotherhood of Teamsters National Negotiating Committee will have a claim of $1.8 million; the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union will have a claim of $50,680; the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America UAW will have a claim of $5.4 million; and the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union will have a claim of $102,409, according to court papers.

Life Insurance

In a separate accord with the official committee of retired employees, Hostess will continue to provide life insurance benefits to the same retirees currently receiving life insurance benefits through the end of this month. Hostess will also provide retiree medical benefits through the end of May.

The retirees, collectively, will have a pre-bankruptcy unsecured claim in the amount of $10.5 million, according to court papers. About 244 retirees receive medical benefits and about 1,104 receive post-retirement life insurance, according to court documents.

Previously known as Interstate Bakeries Corp., Hostess left an earlier bankruptcy in 2009 under the control of buyout firm Ripplewood Holdings LLC and lenders. The company, based in Irving, Texas, entered bankruptcy again in January 2012.

The case is In re Hostess Brands Inc., 12-22052, U.S. Bankruptcy Court, Southern District of New York (White Plains).

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