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Reports: Wal-Mart, Kroger Among First Round Bidders For Hostess Brands

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World's largest retailer Wal-Mart Stores, Inc. (WMT: Quote) and the largest food retailing company in the U.S. Kroger Co. (KR: Quote) are said to be in the fray among the two dozen potential buyers for the brands and assets of bankrupt Twinkies maker Hostess Brands, Inc., according to media reports on Thursday. A deal or multiple deals are expected to fetch as much as $1 billion.

Some of the potential bidders are reportedly interested in acquiring all the assets, while some are looking to buy only the cakes or bread businesses.

Some of the other companies in the fray are Flowers Foods, Inc. (FLO: Quote), Campbell Soup Co. (CPB: Quote), world's largest breadmaker Grupo Bimbo S.A.B. de C.V. (GRBMF), ConAgra Foods, Inc. (CAG: Quote), McKee Foods Corp, Sun Capital Partners, Inc., as well as private-equity firms C. Dean Metropoulos & Co., and Hurst Capital LLLP.

The U.S. Bankruptcy Court had set a deadline date of December 10 for all interested parties to submit letters of interest, while no date is set for the decision on the bids. Hostess Brands is said to have received first-round bids from Wal-Mart, Kroger, Grupo Bimbo, and Alpha Baking.

Perella Weinberg Partners is helping in the sales of Hostess' iconic American brands, while FTI Consulting, Inc. (FCN: Quote) is assisting in the sales process for its assets.

Hostess Brands is selling its popular brands, including Hostess, Drakes and Dolly Madison, which make iconic cake products such as Twinkies, CupCakes, Ding Dongs, Ho Ho's, Sno Balls and Donettes. Bread brands to be sold include Wonder, Nature's Pride, Merita, Home Pride, Butternut, and Beefsteak, among others.

Hostess Brands said initially in late November that it is in active talks with nearly 110 potential buyers, with 70 of them having signed non-disclosure agreements that allowed them to conduct due diligence. The entire sale process is expected to be completed in one year.

Irving, Texas-based 82-year old Hostess Brands shut down its 33 bakeries, 565 distribution centers, and 570 bakery outlet stores across the U.S. in mid-November after last-hitch efforts to negotiate a labor contract to restart operations failed. This has left more than 18,000 people jobless.

The company and the Bakery, Confectionary, Tobacco and Grain Millers Union (BCTGM) were unable to reach an agreement during an 11th-hour mediation after a nationwide strike initiated by the company's largest unions BCTGM began on November 9 that crippled its operations at a time when the company was striving to exit its second bankruptcy.

Hostess had earlier spent below five years to exit its first bankruptcy that was filed in 2004. The company emerged from that bankruptcy in 2009 as a privatly-held company controlled by its lenders and buyout firm Ripplewood Holdings LLC.

The BCTGM in September rejected a last, best and final offer from Hostess Brands designed to lower costs so that the company could attract new financing and emerge from bankruptcy.

The company then said Hostess Brands has been forced by a Bakers Union strike to shut down all operations and sell all company assets, including its iconic brands, facilities and assets. The move came despite the company obtaining the support of its largest union, the International Brotherhood of Teamsters, and its lenders.

The U.S. Bankruptcy Court for the Southern District of New York approved its emergency interim motion filed on November 16 for the orderly wind down of its business and sale of its assets on November 21 following the strike by unionized workers.

Hostess had filed for bankruptcy in January, following which the bankruptcy court ruled the implementation of an eight percent cut in worker's salary, reduction in pension plan obligations and as well on contributions to healthcare plans.

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by RTT Staff Writer

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