SLIDESHOW

ACG New York Women of Leadership - Entrepreneur Series
Barbara Bradley Baekgaard, founder of Vera Bradley (Nasdaq: VRA), is the latest in a series of entrepreneurs highlighted at ACG New York Women of Leadership events. Photo credit: Robert Blumenfeld

Watercooler

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Amid a slow and challenging year for dealmaking, the winners of Mergers & Acquisitions’ 7th Annual M&A Mid-Market Awards outpaced the competition to grow, innovate and lead the middle market

Dealmakers

The Buyside:
Disney, Warner Bros. Seek Next-Gen YouTubes

Traditional Hollywood studios such as Disney and Warner Bros. are seeking next-generation YouTube content providers

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Activist Investors Dig Into Mid Market
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Today's Transactions:
Grupo Bimbo, Flowers To Bid for Bankrupt Hostess’ Assets

The list of bidders narrows for the Twinkie-maker’s bread business, which includes Wonder Bread and Nature’s Pride

Grupo Bimbo SAB de CV (BMV: BIMBO) is expected to close in on part of bankrupt Hostess Brands Inc.’ bread business, according to several reports.

Flowers Foods Inc., a maker of baked foods under such brands as Nature's Own, is also considered an eager bidder in the contested auction for Hostess, which counts Nature’s Pride among its many products.

Mergers & Acquisitions pegged both companies to be auction participants after Hostess announced its intent to wind down operations and sell its assets in November. 

Grupo Bimbo is a Mexican bread maker that owns the Thomas’ and Entenmann’s brands. Hostess’ bread brands include Wonder Bread, Nature’s Pride and Butternut and could reportedly sell for about $350 million.

Other players expected to bid on Hostess’ assets include Wal-Mart Stores Inc. (NYSE: WMT) and the Kroger Co. (NYSE: KR). 

If a bidder comes to an agreement with Hostess, the company will file bidding procedures naming one or more stalking-horse bidders. Then Hostess would head to its auction process, where the stalking-horse bid(s) are subject to higher and better offers.

Judge Robert Drain of the U.S. Bankruptcy Court for the Southern District of New York approved the company’s plan to wind down and sell its assets on Nov. 30, court documents show. Hostess announced it wanted to wind down after failed attempts to resolve issues with its striking bakers union.

When Hostess proposed the wind down on Nov. 16, it estimated the first 13 weeks of the process would cost $8.1 million. It planned to pay with its debtor-in-possession loan, which the court approved Feb. 3.

FTI Consulting Inc. determined Hostess’ property likely has a liquidation value of $200 million, its machinery and equipment has a liquidation value of around $12 million and its intellectual property would be worth at least $100 million. The company agreed in court on Nov. 19 to enter mediation to try to avoid liquidation.

The baker filed for bankruptcy protection on Jan. 11 in the U.S. Bankruptcy Court for the Southern District of New York in Manhattan. When the company sought bankruptcy protection, it operated 36 bakeries, 565 distribution centers, 5,500 delivery routes and 570 bakery outlet stores in the U.S.

In court papers, Hostess said that the most expensive part of its operating costs is its obligations under collective bargaining agreements (CBAs) that cover about 15,000 employees.

“Hostess simply cannot emerge as a viable competitor unless they are relieved of significant financial commitments and arcane work rules imposed by their collective bargaining agreements,” the company says in court papers.

The debtor filed a motion on Jan. 25 to reject the CBAs and modify benefit obligations. The BCT ultimately refused to negotiate with the debtors. The International Brotherhood of Teamsters and Hostess attempted negotiations, which initially failed.

The court granted the motion to reject with regard to the BCT workers, but denied it in regard to the teamsters, court documents show.  During continued discussions, the teamsters indicated that their participation in a reorganization plan was conditioned upon Hostess sticking with their multi-employer pension plans, an agreement under their CBA, which caused Hostess’ potential outside investor to walk away, the debtor said in court papers.

Eventually, Hostess was able to modify CBAs with each of its unions. It started implementing those changes in October. Beginning on Nov. 7 it received strike notices from the BCT union, and then other unions. Thousands of workers formed picket lines outside of Hostess’ bakeries, according to court documents.

Other well-known Hostess brands include Ding Dongs, Dolly Madison, Drake’s, Home Price and Merita. 

 

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