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Reports: Apollo Global, C. Dean Metropoulos Near Deal To Buy Some Hostess Brands

Private-equity firms Apollo Global Management LLC (APO) and C. Dean Metropoulos & Co. are together nearing a deal to acquire the Twinkie brand and other cake brands of bankrupt Hostess Brands, Inc. for about $400 million, according to media reports on Tuesday. A deal could be announced towards the end of the week.

Private-equity firm Hurst Capital LLP was also in the fray for Hostess's cake brands, but is said to have fallen short of being the stalking horse bidder, which is a preferred bidder among multiple bidders in a bankruptcy-court auction process.

The stalking horse bidder is chosen by the bankrupt company to make the first bid at the final auction that sets the bar so that other bidders cannot bid below that purchase price.

Meanwhile, Flowers Foods, Inc. (FLO) has offered nearly $360 million in cash for five of major Hostess bread brands, including Wonder and Nature's Pride, along with 20 plants and 38 depots. Flowers has also offered to buy Hostess's Beefsteak rye brand for $30 million.

United States Bakery, Inc. or popularly known as Franz Family Bakery, has offered $28.85 million to buy some of the bread brands including Sweetheart, Eddy's, Standish Farms and Grandma Emilie's, along with four bakeries, 14 depots and equipment.

Further, McKee Food Corp. has submitted a $27.5 million offer to acquire one of the Drake's brand, which made treats like Devil Dogs, Ring Dings and Yodels, along with certain equipment.

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.

Hostess had filed for bankruptcy in January 2012, 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.

The U.S. Bankruptcy Court for the Southern District of New York approved on November 21 its emergency interim motion, filed on November 16, for the orderly wind down of its business and sale of its assets following the strike by unionized workers. A deal or multiple deals are expected to fetch as much as $1 billion from the sale of the company's brands and assets.

World's largest retailer Wal-Mart Stores, Inc. (WMT) and the largest food retailing company in the U.S. Kroger Co. (KR) were also said to be in the fray among the two dozen potential buyers for the brands and assets of bankrupt Twinkies maker Hostess Brands. 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 Campbell Soup Co. (CPB), world's largest breadmaker Grupo Bimbo S.A.B. de C.V. (GRBMF), ConAgra Foods, Inc. (CAG), McKee Foods Corp, Sun Capital Partners, Inc., as well as private-equity firms.

Perella Weinberg Partners is helping in the sales of Hostess' iconic American brands, while FTI Consulting, Inc. (FCN) 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.

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.

APO closed Tuesday's regular trading session at $21.20, up $0.01 or 0.05% on a volume of 0.45 million shares.

by RTT Staff Writer

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