White bread fans breathed a sigh of relief on Friday as Flowers Foods, Inc. (NYSE:FLO) won the kick off bid for the Wonder brand and other known ones for $390 million from Hostess Brands Inc.
This comes on the heels of the Hostess filing for bankruptcy reorganization last week.
Continued from part one... Q1 hedge fund letters, conference, scoops etc Abrams and his team want to understand the fundamental economics of every opportunity because, "It is easy to tell what has been, and it is easy to tell what is today, but the biggest deal for the investor is to . . . SORRY! Read More
The $390 million potential acquisition can be broken down into two segments. Flowers Foods, Inc. (NYSE:FLO) will pay $360 million for five brands including Wonder, Butternut, Home Pride, Merita and Nature’s Pride, along with 20 bakeries and 38 depots.
The $30 million balance is a contract to purchase Hostess’ Beefsteak brand, reported Reuters.
As for the Hostess snack cake unit, including the popular Twinkies and Drake’s cakes along with the rest of its bread brands, the company is still looking for buyers.
According to The Wall Street Journal, private-equity firms Apollo Global Management LLC (NYSE:APO) and C. Dean Metropoulos & Co. may be suitors for the Hostess’s cake business, but it doesn’t mean they’ll end up placing a bid. At this time, they are only conducting talks.
By joining Flower Foods, the Hostess Brands will be combined with Cobblestone Mill, Nature’s Own and Tastykake brand. The company will look for the Hostess purchase to contribute to 2013 earnings and through cash and debt, it will finance the acquisition.
Flowers Foods, Inc. (NYSE:FLO) sits as the No. 2 bakery by sales in the U.S. It has grown over the years from acquisitions and with a Southern U.S. presence, Hostess with its national distribution, gives it an opportunity to expand its reach, according to The Wall Street Journal.
The transaction is still subject to bigger bids at a court-supervised auction, but it will kick off the bidding. The company will also require approval by regulators and the court through U.S. Bankruptcy Judge Robert Drain in White Plains, New York.
For now, Flowers Foods, Inc. (NYSE:FLO)’ winning right to be the auction’s initial bidder comes after beating the large Grupo Bimbo SAB de CV. The company’s U.S. brands includes popular Entenmann’s, Sara Lee and Thomas’.
So why Flowers? Hostess has said it chose the company’s bids after Perella Weinberg Partners bankers oversaw a bidding process that brought in 169 possible buyers; of that number, 87 signed confidentiality agreements.
Wal-Mart Stores, Inc. (NYSE:WMT) and The Kroger Co. (NYSE:KR) have joined the possible buyers, according to different news reports.
Hostess will request a Feb. 28 auction, followed by a March 5 hearing to authorize the sale.
It’s been a busy few months for Hostess after it closed it closed its baking business and then liquidated in November following a heated baker’s union strike that crushed the company and angered Twinkie fans.