Hostess Brands, Maker of Twinkies®, Announces Sale Agreement with Gores Holdings, Inc.

Hostess BrandsHostess Brands

LOS ANGELES–(BUSINESS WIRE)–Hostess Brands, LLC (“Hostess” or the “Company”), the maker of Hostess® Twinkies®, Ding Dongs® and CupCakes, announced it has entered into a definitive agreement with Gores Holdings, Inc. (“Gores Holdings”) (NASDAQ CM: GRSHU, GRSH, GRSHW), a special purpose acquisition company sponsored by an affiliate of The Gores Group, LLC (“The Gores Group” or “Gores”). This transaction will introduce Hostess as a publicly listed company, with an anticipated initial enterprise value of approximately $2.3 billion or 10.4x the Company’s estimated 2016 Adjusted EBITDA of approximately $220 million.

“I have enjoyed working together with Apollo to build a vibrant and exciting company, and we are pleased to partner with the Gores Holdings team as we move to the next stage of Hostess’ growth and expansion”

Along with the $375 million of cash held in Gores Holdings’ trust account, additional investors have committed to participate via $350 million private placement, led by Alec Gores, Chairman and CEO of The Gores Group, and comprising large institutional investors, C. Dean Metropoulos (via $50 million of additional rollover contribution), and Gores affiliates.

Funds managed by affiliates of Apollo Global Management, LLC (together with its consolidated subsidiaries, “Apollo”) (NYSE: APO) and C. Dean Metropoulos and family, the current majority owners of Hostess, expect to hold an approximately 42% combined stake in Gores Holdings upon completion of the transaction. Dean Metropoulos and William Toler will continue to lead the Company as Executive Chairman and Chief Executive Officer, respectively. This transaction better enables Hostess to continue executing on its long-term growth plan by providing greater access to capital to fund future innovation and acquisitions.

“I have enjoyed working together with Apollo to build a vibrant and exciting company, and we are pleased to partner with the Gores Holdings team as we move to the next stage of Hostess’ growth and expansion,” stated Dean Metropoulos. “We look forward to continuing both our strong organic growth through unique innovations and niche, strategic acquisitions, such as our recent acquisition of Superior Baking, which will extend Hostess’ consumer reach in the ‘in-store bakery’ market and expand offerings to customers.”

“This new phase in Hostess’ evolution and partnership with The Gores Group and our broader investor partners will continue to propel Hostess into a growing and innovative company with significant reach and potential long into the future,” he added. “We are very excited to continue to build this wonderful company and its iconic brands.”

Alec Gores, Chairman and CEO of The Gores Group, said, “We are pleased to partner with Dean, Bill and Apollo to introduce Hostess as a publicly listed company. We have evaluated a number of potential acquisitions for Gores Holdings and believe this transaction offers a superior option for our stockholders. Hostess presents a unique opportunity to invest in an iconic brand with strong fundamentals that is poised for continued growth. We look forward to working with the team at Hostess as we collaborate to further capitalize on these attractive growth prospects.”

Andy Jhawar, Senior Partner and Head of the Consumer and Retail Group at Apollo, said, “We are extremely proud of all that we have accomplished together since we acquired these assets out of liquidation in 2013 and rebuilt the company into the great platform business it is today. Hostess possesses exciting continued organic top-line growth potential and is one of the highest EBITDA margin and cash generative food platforms in the U.S. We look forward to continuing our partnership with Dean and Bill, along with the team at Gores, to further grow and build Hostess.”

Hostess was founded in 1919 with the introduction of the Hostess CupCake to the American public. In 1930, Twinkies were introduced, which was an event many say changed the snack cake world. Today, Hostess Brands produces a variety of new and classic treats including Ding Dongs®, Ho Hos®, Donettes® and Fruit Pies, in addition to Twinkies and CupCakes. Hostess had revenues for the twelve months ended May 31, 2016 of approximately $650 million and operates three baking facilities located in Emporia, KS, Indianapolis, IN and Columbus, GA. The Company has a competitively advantaged business model and Direct-to-Warehouse distribution system, and an experienced management team with a successful track record in both relaunching and growing businesses.

Key Transaction Terms

The transaction will be effected pursuant to the Master Transaction Agreement entered into by and among Gores Holdings, the sellers and the other parties thereto. Concurrently with the consummation of the transaction, additional investors will purchase shares of common stock of Gores Holdings in a private placement. After giving effect to any redemptions by the public stockholders of Gores Holdings, the balance of the approximately $375 million in cash held in Gores Holdings’ trust account, together with the $350 million in private placement proceeds (which include $50 million of additional rollover consideration from C. Dean Metropoulos), will be used to pay the sellers cash consideration, pay transaction expenses and repay a portion of the Company’s existing indebtedness to 4.5x 2016 Adjusted EBITDA. The remainder of the consideration payable to the sellers will consist of shares of Gores Holdings common stock.

In order to facilitate the transaction, Gores Holdings’ sponsor has agreed to the cancellation of a portion of the 9,375,000 founder shares and the acquisition of shares of common stock of Gores Holdings by the sellers under the Master Transaction Agreement and in the private placement at a discount. In addition, the shares of Gores Holdings common stock received by the sellers in the transaction (other than certain rollover shares held by C. Dean Metropoulos) will be restricted from trading for at least 180 days following the completion of the transaction.

As part of the transaction, Gores Holdings will also enter into a tax receivable agreement with the sellers, which will provide for the sharing of tax benefits relating to pre-transaction combination tax attributes and tax attributes generated by the transaction as those attributes are realized by Gores Holdings.

The transaction has been unanimously approved by the boards of directors of both Gores Holdings and Hostess, and is expected to close in the third quarter of 2016, subject to the receipt of regulatory approval, and approval of the stockholders of Gores Holdings. Upon closing of the transaction, the name of the Company will be changed to Hostess Brands, Inc.

Deutsche Bank Securities Inc. acted as lead capital markets advisor, along with Moelis & Company and Morgan Stanley, and financial advisor and Weil, Gotshal & Manges LLP acted as legal advisor to Gores Holdings. Rothschild & Co., Credit Suisse and Perella Weinberg Partners acted as M&A advisors to Hostess. Morgan, Lewis & Bockius acted as legal advisor to Apollo. Paul, Weiss, Rifkind, Wharton & Garrison acted as legal advisor and UBS acted as financial advisor to C. Dean Metropoulos and his family.

Conference Call Information

At 1:00 pm EDT on July 5, 2016, Gores Holdings will be holding an investor conference call to discuss the transaction. For those who wish to participate, the domestic toll-free access number is (855) 729-4767 and the international toll-free access number is (615) 489-8573. Once connected with the operator, please provide the Conference ID number of 42925543 and request access to the Gores Holdings and Hostess Brands Investor Call.

A replay of the call will also be available from 5:00 pm EDT on July 5, 2016 to 11:59 pm EDT on July 12, 2016. To access the replay, the domestic toll-free access number is (866) 247-4222 and participants should provide the Conference ID number of 42925543 and request access to the Gores Holdings and Hostess Brands Investor Call.

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