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Hostess closure OK’d, brands for sale

By Associated Press

POSTED:


WHITE PLAINS, N.Y. >> Twinkies, Ho Hos and Wonder Bread are up for sale now that a bankruptcy judge cleared the way for Hostess Brands Inc. to fire its 18,500 workers and wind down its operations.

A last-ditch effort to end a strike with Hostess’ bakers union failed Tuesday night, and on Wednesday, Judge Robert Drain approved the company’s request to shut down its business and sell the pieces to the highest bidder.

Hostess lawyers told Drain that they needed to begin the liquidation process quickly to take advantage of a surge in outside interest in its brands, which in addition to its namesake include Nature’s Pride, Dolly Madison and Drake’s.

Hostess, based in Irving, Texas, also wanted to quickly shut down because it has been spending about $1 million a day in payroll without any income since it halted operations last week.

The company will send out termination notices to its employees on Wednesday, said CEO Gregory Rayburn.

“Those employees now need to look for work,” he said.

Hostess said it plans to retain about 3,200 employees to help with the initial phase of the wind down. The entire process should take about a year.

The snack maker’s demise was years in the making. Management missteps, rising labor costs and changing tastes culminated in a crippling strike by the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union.

Hostess shut down its plants late last week after it said the strike by the bakery union hurt its ability to maintain normal production. The liquidation means the closure of 33 bakeries, 565 distribution centers, about 5,500 delivery routes and 570 bakery outlet stores, the company said.

Management had said Hostess was already operating on razor-thin margins and that the strike was the final blow. The union, meanwhile, pointed to the steep raises executives got last year as the company was spiraling toward bankruptcy.

“This is a very hostile situation and in some respects rightfully so,” Rayburn said.

A banker working for Hostess said at Wednesday’s hearing that brands typically fetch the equivalent of about a year’s sales when they are sold off in liquidation. He said Hostess’ sales are in
the range of $2.3 billion to $2.4 billion a year.

The banker, Joshua Scherer of Perella Weinberg Partners, said that interest in Hostess’ brands has come from companies ranging from regional bakers to major national retailers that have long sold Hostess products.

“This is a once-in-a-lifetime opportunity to get iconic brands separate from their legacy operators,” Scherer said during the hearing in U.S. Bankruptcy Court in the Southern District of New York in White Plains, N.Y.

The company’s initial announcement on Friday that it would move to liquidate its business prompted people across the U.S. to rush to stores and stock up on their favorite Hostess treats. Many businesses reported selling out of Twinkies within hours and the spongy yellow cakes turned up for sale online for hundreds of dollars.

Hostess, founded in 1930, filed for Chapter 11 bankruptcy protection in January for the second time in less than a decade. Its predecessor company, Interstate Bakeries, sought bankruptcy protection in 2004 and changed its name to Hostess after emerging in 2009.






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whs1966 wrote:
"The snack maker’s demise was years in the making. Management missteps, rising labor costs and changing tastes culminated in a crippling strike by the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union." Ah, yes, blame the union for this mess. What's not in the article is that the company was purchased by a private equity company, which squeezed over $100 million in concessions from its workers, pulled out all available equity, took on enormous debts, and stuck it to its creditors through bankruptcy a few years ago. Emerging from the first bankruptcy, the owners tried to repeat the cycle. Oh.... those must be the "management missteps" referred to in the article.
on November 22,2012 | 04:18AM
soundofreason wrote:
From article written by Thomas Sowell...........

The Twinkies bankruptcy is a classic example of costs created by labor unions that are not confined to paychecks.

The work rules imposed in union contracts required the company that makes Twinkies, which also makes Wonder Bread, to deliver these two products to stores in separate trucks. Moreover, truck drivers were not allowed to load either of these products into their trucks. And the people who did load Twinkies into trucks were not allowed to load Wonder Bread, and vice versa.

All of this was obviously intended to create more jobs for the unions' members. But the needless additional costs that these make-work rules created ended up driving the company into bankruptcy, which can cost 18,500 jobs. The union is killing the goose that laid the golden egg.


on November 22,2012 | 08:23AM
serious wrote:
Agreed, where was Joe Biden? These are JOBS lost. Now a Cabinet official might have gone to help on this but none of them has any experience in running a business. Just like the towns, cities and states that are facing bankruptcy, too many gifts to the unions. Let's see how WalMart does Friday with their non-union workers--I say fire them. They claim low wages, simple, get an education in a trade that pays more. Like MacDonalds--it's a starting job. If you have no other skills, that's it--just don't get a dozen kids.
on November 22,2012 | 08:33AM
soundofreason wrote:
Exactly what I was saying just last night. Want to get paid more than 8 bucks an hour? Make yourself WORTH more than 8 bucks an hour.
on November 22,2012 | 09:01AM
Papakolea wrote:
That's a great quote. I'm gonna borrow that.
on November 22,2012 | 10:07AM
soundofreason wrote:
That'll cost ya 9 bucks. See how that works? ;)
on November 22,2012 | 05:59PM
lee1957 wrote:
You need to do more research.
on November 22,2012 | 11:09AM
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