Hostess Judge Approves Asset Sales of Over $800 MillionDawn McCarty
Snack-maker Hostess Brands Inc. won court permission to sell assets totaling more than $800 million.
U.S. Bankruptcy Judge Robert Drain in White Plains, New York, yesterday approved sales to Flowers Foods Inc., Grupo Bimbo SAB, Apollo Global Management LLC and C. Dean Metropoulos & Co. for most of Hostess’s cake and bread brands.
Hostess attorney Lisa Laukitis told Drain the sales were in the best interests of the company and creditors, and there is “sound justification” for the deals, with “the highest and best offers” from “good-faith purchasers.”
Before the sales were approved, lawyers for buyers expressed concern about possible liability after they acquire the properties. Drain suggested “wordsmithing” the sale agreements slightly to protect the buyers.
“If you don’t, I will put it in,” Drain said.
Hostess was given extra time by Drain to file a bankruptcy plan after arguing it still has significant assets to sell that may yield more than $100 million to help pay creditors. Hilco Trading LLC was hired last year with court permission to sell real estate, leases, machinery, equipment and intellectual property not part of going-concern sales.
The asset sales will be supplemented by the Hilco proceeds, which might bring the total to more than $900 million, Heather Lennox, a lawyer for Hostess, told the court.
“We embarked on the sales process with one overarching goal -- to maximize value for all of the company’s stakeholders -- and I am pleased to report that we have been successful,” Gregory Rayburn, chief executive officer of Irving, Texas-based-Hostess, said in an e-mailed statement. “I’d like to thank all of the employees and advisers who supported the process and helped preserve the value of some of the most beloved brands in the U.S.”
A joint offer from Apollo and Metropoulos was the only qualified bid received by the deadline for the assets they bought. The companies offered as much as $410 million for the Hostess snack-cake business, which includes Twinkies, CupCakes, Ding Dongs and Ho Hos, and other assets including five bakeries and equipment.
Flowers, based in Thomasville, Georgia, will pay $360 million for Hostess’s Wonder, Butternut, Home Pride, Merita and Nature’s Pride brands, 20 bread plants, 38 depots and other assets.
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.
Grupo Bimbo won an auction to buy the Beefsteak bread brand, beating an initial bid by Flowers with a $31.9 million offer.
McKee Good Corp., maker of Little Debbie snacks, made the only qualified bid for Drake’s. McKee will pay $ 27.5 million for Drake’s products including Devil Dogs, Ring Dings, Yodels, Yankee Doodles, Sunny Doodles, Funny Bones and Drake’s Coffee Cake.
McKee, based in Collegedale, Tennessee, will buy the brands and equipment, according to court papers.
United States Bakery won a March 15 auction with a bid of $30.9 million for the Sweetheart, Eddy’s, Standish Farms and Grandma Emilie’s bread brands, four bakeries and 14 depots, plus certain equipment.
An April 9 hearing is scheduled to approve the sale of those assets.
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.
“Today, the court brought further assurance that” several Hostess “iconic brands will return to the marketplace,” David Durkee, International President of the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union, said yesterday in an e-mailed statement.
“We share the enthusiasm, energy and passions exhibited by new ownership, and believe our highly motivated and skilled workforce will serve as indispensable partners in the seamless re-opening of factories,” Durkee said.
The case is In re Hostess Brands Inc., 12-bk-22052, U.S. Bankruptcy Court, Southern District of New York (White Plains).