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January 31, 2013

The Associated Press

Hostess picks lead bidder for Twinkies brand

By CANDICE CHOI The Associated Press

NEW YORK — Hostess has picked a lead bidder for its famous Twinkies.

The bankrupt company said late Wednesday that it has selected a joint offer from two investment firms – C. Dean Metropoulos & Co. and Apollo Global Management LLC – as the lead bid for its Twinkies and other snack cakes.

Hostess, says the two are offering to pay $410 million for the snack-cake business and five bakeries.

The “stalking horse” bid would set the floor for an auction process that lets competitors make better offers. A judge would have to approve any final sale.

After years of management turmoil and turnover, Hostess got final bankruptcy court approval on Nov. 21 to close its 33 bakeries and put its brands up for sale, putting about 15,000 employees out of work.

In Maine, 500 Hostess employees lost their jobs, including 370 at the Hostess bakery in Biddeford, which produced chocolate cupcakes, Sno Balls and other snack cakes and bread.

The offer sets the stage for the return of Twinkies and other Hostess cakes to supermarket shelves under new management, which could mean stepped up marketing for the spongy yellow cakes with mysterious cream filling. Although supermarkets saw a run on Twinkies when news hit in November that Hostess was going out of business, the company’s sales had been declining amid changing tastes and a lack of investment in marketing.

In bankruptcy proceedings, Hostess has stressed that it needs to move quickly in the sale of its brands to capitalize on the outpouring of nostalgia and media coverage prompted by its demise. The longer the cakes and breads are off shelves, the more people will become accustomed to eating cakes and breads by rivals, the company has said.

Still, Hostess cakes generated significant sales to the end. For its final year, Twinkies pulled in about $76.2 million, according to Hostess. Hostess Donuts brought in $384.6 million and CupCakes brought in $138.1 million. The figures do not include sales at Walmart stores.

Hostess Brands Inc., based in Irving, Texas, has been filing the bids for its brands in stages. Flowers Foods Inc., which makes Tastykakes, was picked as the lead bidder for six of Hostess’ major bread brands, including Wonder.

United States Bakery Inc. was picked as the lead bidder for some smaller bread brands.

Hostess had been making its second trip through bankruptcy reorganization and hired CEO Greg Rayburn as a turnaround expert for $125,000 a month. Rayburn said the company would have to shut down after workers at its second biggest union went on strike and the company couldn’t reach a deal on a new contract.

On Monday, the company requested in a bankruptcy filing to stop making payments to its retiree benefits as of Feb. 28. It had already stopped contributing to employee pensions.





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