Hostess Brands Inc is expected to file for a “stalking horse” agreement for Drakes brand next week, according to a report from Bloomberg citing a statement from the lawyer of the company after a court hearing today.
The broke maker of Twinkies snack and Wonder bread asked the U.S bankruptcy Court for the Southern District of New York, presided by Judge Robert Drain, to approve its plan to sell the majority of its bread brands and Beefsteak brand in an auction on February 28.
Hostess Brands Inc also requested Judge Drain to approve its bidding procedures. Furthermore, the company asked the court to approve some terms including the disputed $13.65 million break up, which will be received by Flower Foods Inc (NYSE:FLO) in case it does not win the bidding process.
Flower Foods, Inc. (NYSE:FLO) agreed to purchase Wonder and other well-known bread brands such as Butternut, Home Pride, Merita, Natures Pride from Hostess Brands including its 20 bakeries and 38 depots for $360 million. The Thomasville, Ga-based company also agreed to buy the Beefsteak brand for $30 million.
A related report from Reuters, citing an unnamed source, said Hostess Brands is expecting to receive initial offers for its Drakes brand and four other bread businesses for approximately $50 million.
According to report, McKee Foods Corporation is expected to submit a proposal to buy Drakes, which makes Devil Dogs, Ring Dings, Yodels for around $27 million. The source familiar with the matter said negotiations between McKee Foods Corporation and Hostess Brands is still ongoing, and the final purchase price could change.
Hostess Brands also expects United States Bakery Inc, also known as Franz Family Bakery, to submit an offer to buy Sweetheart, Eddy’s, Standish Farms, and Grandma Emilie’s bread brands for approximately $27 million, according to the source.
The bids from the companies are called “stalking horse” agreement because a baseline offer has been set for the assets, which are still subject to auctions.
Meanwhile, during the court hearing, Judge Drain approved the March 28 deadline for the former workers of Hostess Brands to file claims for back payment, severance and other benefits.
Hostess Brands Inc filed for chapter 11 bankruptcy protection in January last year after years of declining sales. Last November, Judge Drain approved the company’s emergency interim motion to wind down its business and sell its assets.