Hostess Brands Inc. said McKee Foods Corp. agreed to pay $27.5 million for its Drake’s brand and United States Bakery Inc. offered to buy certain bread brands for $28.9 million.
“The contemplated purchase prices for Drake’s and the four bread brands, together with our previous announced stalking horse bid for the majority of our bread business, means we have agreements to sell these assets for at least $440 million,” Hostess Chief Executive Officer Gregory F. Rayburn said in a statement.
United States Bakery agreed to buy the Sweetheart, Eddy’s, Standish Farms and Grandma Emilie’s bread brands, four bakeries and 14 depots, plus certain equipment, according to the statement.
Drake’s products include Devil Dogs, Ring Dings, Yodels, Yankee Doodles, Sunny Doodles, Funny Bones and Drake’s Coffee Cake, according to court papers filed Monday.
Flowers Foods, based in Thomasville, Georgia, will serve as the lead, or stalking horse, bidder for Hostess’s Wonder, Butternut, Home Pride, Merita and Nature’s Pride brands, 20 bread plants, 38 depots and other assets. Flowers is offering $360 million, plus $30 million for the Beefsteak brand. An auction is set for Feb. 28, followed by a hearing to authorize the sales.
Flowers Foods, established in 1919, produces and markets packaged baked goods for retail and food-service customers. The company’s top brands are Nature’s Own and Tastykake.
Hostess, the 82-year-old maker of Hostess CupCakes, Ding Dongs and Ho Hos, began to wind down in November after failing to reach an agreement with its bakers’ union on concessions to help the company emerge from its second bankruptcy. Changes in American diets led to years of declining sales at Hostess, while ingredient costs and labor expenses climbed.
A standoff with striking union workers triggered liquidation auctions of Hostess’s brands, recipes, plants and other assets. The Bakery Confectionery Tobacco Workers and Grain Millers International Union, which represented more than 5,000 Hostess workers, went on strike Nov. 9 after U.S. Bankruptcy Judge Robert Drain in White, Plains, New York, imposed contract concessions opposed by more than 90 percent of the union’s members.
Hostess, previously known as Interstate Bakeries Corp., exited an earlier bankruptcy in 2009 under the control of buyout firm Ripplewood Holdings LLC and lenders. Hostess entered bankruptcy again in January 2012.
The case is In re Hostess Brands Inc., 12-22052, U.S. Bankruptcy Court, Southern District of New York (White Plains). The prior bankruptcy was In re Interstate Bakeries Corp., 04- 45814, U.S. Bankruptcy Court, Western District of Missouri (Kansas City).
© Copyright 2015 Bloomberg News. All rights reserved.