Private equity firms Apollo Global Management LLC and C. Metropoulos & Co. have made a $410 million lead bid for Twinkies and other cake brands from bankrupt Hostess Brands Inc.
The private equity firms are the joint stalking-horse bidder for the Hostess and Dolly Madison brand assets, which include Twinkies, Mini Muffins, Cup Cakes, Ho Hos, Zingers and Suzy Qs. The pair is also signed up to acquire five Hostess bakeries.
The Jan. 30 bidding procedures motion came just days after media reports indicated Apollo and Metropoulos would be the stalking-horse bidder for the assets, and soon after Hostess filed bidding procedures for a set of bread assets and Drake’s.
Hostess had originally planned to file the procedures simultaneously with the motions for some of the bread assets and Drake’s, which it filed on Jan. 28, but the parties were unable to finalize the documents in time.
Apollo and Metropoulos are bidding as HB Holdings LLC and New HB Acquisition LLC, according to court documents.
If Apollo and Metropoulos don’t win at an auction, they are entitled to a $12.3 million break up fee, if the bidding procedures are approved. Bids at an auction would need to increase by $1 million increments, after the initial overbid is placed, court documents show.
In order to get the sale to close before Apollo and C. Metropoulos’ financing deal expires on April 15, Hostess requested a shortened notice time for the bidding procedures hearing. Hostess believes it needs to sell its assets quickly, as its competitors’ products are already taking up the company’s former space on grocery shelves, according to court papers. The longer that Hostess products aren’t on the shelves, as they aren’t being made anymore, the more likely consumers will go to a different product, Hostess says in court papers.
If approved, the cake asset sale timeline would match up with the sale process outlined for the Drake’s and other bread assets, with a bidding procedures hearing on Feb. 11, auction on March 15 and sale hearing on March 19.
Mountain States Bakery LLC and McKee Foods Corp. bid $28.85 million and $27.5 million for some of the bread assets and Drake’s, respectively.
Bidding procedures approving Flowers Foods Inc. as the stalking-horse bidder for Hostess’ primary bread assets, including Wonder bread, were approved by Judge Robert Drain of the U.S. Bankruptcy Court for the Southern District of New York on Jan. 28. That auction is scheduled for Feb. 28.
Hostess decided to wind down operations after it failed to resolve issues with striking bakers’ union. The Bakery, Confectionery, Tobacco Workers and Grain Millers International Union (BCT) and other unions started striking on Nov. 9, which caused the company to lose between $7.5 million and $9.5 million in a matter of weeks, according to court documents. The strike came after troubled negotiations regarding collective bargaining agreements (CBAs).
The baker filed for bankruptcy protection on Jan. 11. 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.
Hostess, founded in 1930, was one of the largest wholesale bakers and bread distributors in the U.S. In addition to Twinkies, the company’s brands also include Dolly Madison, Twinkies and Drake’s.
Jones Day is debtor counsel. Kramer Levin Naftalis & Frankel LLP is counsel to the committee of unsecured creditors. Hostess has retained Hilco Trading LLC to sell real estate, machinery and equipment.
Partners Robert Robison, James Garrity Jr., Stanley Lechner, Ron Dreben, Judith Walkoff, Gary Rothstein and Harry Robins of Morgan Lewis and Bockius served as Apollo’s legal counsel for the deal.