Sweet Treats Sticking Around: Buyers Prepare Bids
By Maureen Farrell
(CNNMoney) — Twinkies may never die. Wonder Bread probably won’t either.
Even after Hostess Brands announced that it is shuttering its operations Friday, the company, which entered bankruptcy protection for the second time in January, is expected to find buyers for its iconic brands that include Twinkies, Ho Hos, Sno Balls, and Wonder Bread, according to several bankers who spoke on the condition of anonymity since they are preparing potential bids for the company’s assets.
A spokesperson for Hostess did not return calls for comment. But bankers said the company will most likely break up its two key divisions: snack foods and the bread retailer.
The Twinkies’ unit will probably attract the most potential bidders. Mexican bread company Grupo Bimbo; privately held McKee Foods, which makes Little Debbie snack cakes;Flower Foods, which owns Tastykake, and Canadian company Weston Foods are all seen as potential buyers for this division.
Mike Gloekler, a spokesperson for McKee Foods, declined to comment on a potential bid, but said “the most valuable thing Hostess is holding onto is those name brands.”
“Somebody is going to be interested in them,” Gloekler added.
But the Little Debbie’s owner is hoping to take advantage of what could be a temporary shutdown of Twinkies production. Gloekler said that McKee is “preparing our employees to work more hours during the holiday season than they typically would” in order to get more of its snack products to market.
Grupo Bimbo, Flower Foods, and Weston Foods did not return calls for comment.
If Wonder Bread does survive, it might have a number of different owners across the U.S.
Grupo Bimbo, which owns the Arnold brand of bread and is currently the number one bread company in the U.S., would likely be banned from making a bid because of antitrust concerns, according to one of the bankers. Flowers Foods, the second largest U.S. bread company, could conceivably buy some of the bread division’s regional assets and operations in order to expand its Midwest operations, the banker said. Flowers owns the Nature’s Own brand of bread.
Other small regional companies might pick up Wonder Bread’s regional assets on an ad hoc basis, sources said.
Fortune’s Dan Primack noted that various Hostess brands are also expected to generate interest from the private equity world, even though the company’s current owners, private equity firm Ripplewood Holdings, is expected to lose its entire investment in Hostess. Ripplewood Holdings purchased part of Hostess after it exited Chapter 11 in 2009.
But the acquisition of Hostess assets may not necessarily help to save the jobs of the company’s 18,500 employees, most of which were unionized. By purchasing assets out of a bankruptcy sale, potential acquirers can ignore the company’s union obligations and selectively rehire employees on their own terms.
In addition to its high pension guarantees for its union employees, Hostess has struggled as more consumers are interested in healthy snack options. For that reason, Hostess is unlikely to generate interest from large food companies like Kraft or its recent spin-off Mondelez, Frito-Lay owner PepsiCo, or General Mills, according to sources. Most of these food companies want to either increase their portfolio of healthier snacks or add a global brand. Hostess offers neither.