McKee Foods Wins Hostess’ Drakes Assets

Hostess Brands Inc. has found a new home for its Devil Dogs cake brand.

The snack is just one of several other assets under the Drake’s cakes label - Coffee Cakes, Funny Bones, Ring Dings, Sunny Doodles, Yankee Doodles and Yodels – to be taken over by McKee Foods Corp. with a $27.5 million bid.

Bankrupt Hostess did not receive any other qualified bids for the assets, according to court documents.

McKee was named stalking horse bidder for the assets on Jan. 28. The Chattanooga, Tenn.-based buyer makes Little Debbie, Sunbelt and Heartland brand foods.

Judge Robert Drain of the U.S. Bankruptcy Court for the Southern District of New York will preside over a sale hearing on April 9.

Hostess named private equity firms Apollo Global Management and C. Metropoulos & Co. the winning bidders for its Twinkies and other assets on March 12. The duo submitted a $410 million bid. Drain will preside over that sale hearing March 19. 

Flowers Foods Inc. won the baker’s primary bread assets, including Wonder bread, for $360 million, while Grupo Bimbo SAB de CV won the company’s Beefsteak bread brand assets, topping Flowers with a $31.9 million bid. Flowers served as stalking horse bidder for the primary and Beefsteak bread assets, with a $30 million stalking horse bid. 

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, 2011. 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.

Jones Day is debtor counsel. Kramer Levin Naftalis & Frankel LLP is counsel to the committee of unsecured creditors.

For more on Hostess’ bankruptcy case, see “Bidders Line Up for Hostess.”