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Judge urges mediation in Hostess-union dispute

The talks could lead to saving more than 18,000 jobs around the country


Los Angeles Times

POSTED:



Twinkies may live on after all.

Bankrupt Hostess Brands Inc. and its striking union agreed to enter into mediation to try to resolve their differences, putting the baking company's planned liquidation on hold for now.

At a U.S. Bankruptcy Court hearing Monday in White Plains, N.Y., the 82-year-old company sought permission to start shutting down its business. Instead, Judge Robert Drain urged Hostess and the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union to consider mediation.

Both sides agreed to try to work through the conflict, which could preserve more than 18,000 jobs.

Altogether, Hostess has 565 distribution centers around the country, as well as 33 bakeries and 570 bakery outlets.

Mediation hearings will begin today, but the original hearing to consider the shutdown plan was adjourned until Wednesday morning, just in case reconciliation talks don't work out. Production "remains shut down," according to the Irving, Texas, company.

But the scales are out of balance, with the union at a deep disadvantage, said Gene Grabowski, a Washington crisis communications expert at consulting firm Levick.

If discussions fail, Hostess probably will sell itself at a loss and wash its hands of the situation, Levick said. Buyers — potentially major food companies such as ConAgra Foods Inc., Kraft Foods Inc. or Nestle — then probably would absorb the brands into their operations without hiring former Hostess workers.

"It's hard to see what they could accomplish at this point," Grabowski said. "It looks like Hostess management is holding more cards right now than labor. This is really the last hope for employees to save their jobs."

Hostess said Friday that it would go out of business after union members went on strike. Workers accused the company of slashing benefits and wages while rewarding managers with substantial pay raises.

A suite of suitors is already preparing to vie for control of Hostess' brands in case new negotiations fall through.

"There's a whole host of huge food companies out there that have the financial wherewithal to take over Twinkies and make money off of it," said Anthony Michael Sabino, a business professor at St. John's University in New York. "There could be very spirited bidding."

In Bankruptcy Court, investment fund Hurst Capital in Sarasota, Fla., filed a letter of intent to complete what it said was a multimillion-dollar offer to buy Hostess' assets, including intellectual property, computer software and office supplies.

"Hostess has, over the last 80 years, created several of the most recognizable and powerful brands in the United States," said Austin Hurst, the company's managing general partner. "They have undeniable value and, when combined with the other existing assets of the company, represent a compelling acquisition opportunity."

Flowers Foods Inc., the Thomasville, Ga., parent of the Nature's Own brand, said Monday that it has extended its loan agreements, allowing it to access more funds for "acquisition financing" and "expansion goals," among other purposes. To analysts the move signaled that the Georgia baking company was interested in picking up Hostess.

And private equity firm Sun Capital Partners Inc. in Boca Raton, Fla., told Fortune magazine that it hoped to buy the company using a more union-friendly deal. Reports over the weekend also named Grupo Bimbo, the Mexican company that owns Sara Lee and Entenmann's, as a possible bidder.

Hostess spokesman Lance Ignon confirmed that the company has "had interest from buyers for specific assets," but refused to name the interested parties.






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