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Twinkies likely to survive sale of Hostess

By Tom Krisher

AP Business Writer

LAST UPDATED: 05:21 a.m. HST, Nov 19, 2012

DETROIT  >> Twinkie lovers, relax.

The tasty cream-filled golden spongecakes are likely to survive, even though their maker will be sold in bankruptcy court.

Hostess Brands Inc., baker of Wonder Bread as well as Twinkies, Ding Dongs and Ho Ho’s, will be in a New York bankruptcy courtroom Monday to start the process of selling itself. 

The company, weighed down by debt, management turmoil, rising labor costs and the changing tastes of America, decided on Friday that it no longer could make it through a conventional Chapter 11 bankruptcy restructuring. Instead, it’s asking the court for permission to sell assets and go out of business.

But with high brand recognition and $2.5 billion in revenue per year, other companies are interested in bidding for at least pieces of Hostess. Twinkies alone have brought in $68 million in revenue so far this year, which would look good to another snack-maker.

“There’s a huge amount of goodwill with the commercial brand name,” said John Pottow, a University of Michigan Law School professor who specializes in bankruptcy. “It’s quite conceivable that they can sell the name and recipe for Twinkies to a company that wants to make them.”

Hostess has said it’s received inquiries about buying parts of the company. But spokesman Lance Ignon would not comment on analysts’ reports that Thomasville, Ga.-based Flowers Foods Inc. and private equity food investment firm Metropoulos & Co. are likely suitors. Metropoulos owns Pabst Brewing Co., while Flowers Foods makes Nature’s Own bread, Tastykake treats and other baked goods. Messages were left for spokesmen for both companies on Sunday.

“We think there’s a lot of value in the brands, and we’ll certainly be trying to maximize value, both of the brands and the physical assets,” Ignon said Sunday. He said it’s possible some of Hostess’ bakeries will never return to operation because the industry has too much bakery capacity.

Little will be decided at Monday afternoon’s hearing before Bankruptcy Judge Robert Drain, Pottow said. The judge eventually will appoint a company that specializes in liquidation to sell the assets, and the sale probably will take six months to a year to complete, Pottow said. 

Irving, Texas-based Hostess 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.  

The company said it was saddled with costs related to its unionized workforce. The company had been contributing $100 million a year in pension costs for workers; the new contract offer would’ve slashed that to $25 million a year, in addition to wage cuts and a 17 percent reduction in health benefits. 

Management missteps were another problem. Hostess came under fire this spring after it was revealed that nearly a dozen executives received pay hikes of up to 80 percent last year even as the company was struggling. 

Then last week thousands of members of the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union went on strike after rejecting the company’s latest contract offer. The bakers union represents about 30 percent of the company’s workforce.  

By that time, the company had reached a contract agreement with its largest union, the International Brotherhood of Teamsters, which this week urged the bakery union to hold a secret ballot on whether to continue striking. Although many bakery workers decided to cross picket lines this week, Hostess said it wasn’t enough to keep operations at normal levels. 

The company filed a motion to liquidate Friday. The shuttering means the loss of about 18,500 jobs. Hostess said employees at its 33 factories were sent home and operations suspended. Its roughly 500 bakery outlet stores will stay open for several days to sell remaining products.   

News of the decision caused a run on Hostess snacks at many stores around the country, and the snacks started appearing on the Internet at inflated prices. 

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Poipounder808 wrote:
Thank God, obese Americans rejoice!
on November 18,2012 | 01:59PM
PaloloValley wrote:
on November 20,2012 | 06:02AM
kuroiwaj wrote:
As a retired union official, the union screwed up and caused Hostees to close shop. This situation has happened time and again, and will continue in a slow economy. Unions must understand economics and know when to push and when to back off. I'm watching the HSTA/HGEA in Hawaii as the pension/health funds reach a point of insolvency. A tax payer bailout of the funds?
on November 18,2012 | 03:41PM
nodaddynotthebelt wrote:
A very insightful post by someone who has been in it. I agree that unions often push for demands that do not take into consideration the financial situation. They need to put themselves in the shoes of the state government and realize that there is only limited funds and so many demands for services. HSTA suggested that we raise the excise tax to meet their demands. Raising the excise tax is not a good idea. It often is at a cost to the economy. People are already straddled with taxes and adding the additional burden on them will cause a domino effect that can and will hamper spending by the taxpayers. That in turn will affect the businesses that depend on peoples' spending such as the retail and service sector. It shows that HSTA does not care about the budget or the economy we are in. There will be a time when the economy will have improved and that may not be for a while. If, and when that happens, the state can then negotiate with the teachers for compensation that is in tune with what we can afford to pay them. TeacherPortal shows that the state has in fact given the teachers raises when it was able to. Unfortunately they have forgotten that the state has bent backwards many times including the time we raided the hurricane fund which was not a prudent thing to do. Should a hurricane hit the islands on the magnitude of Hurricane Iniki, we will be in such a bind.
on November 18,2012 | 07:14PM
false wrote:
The majority of elected officials in Hawaii will ask Dan Inouye if they can kick the can down the road. Dan will say yes because that is all he is good for. Things will get ALOT worse in the months ahead.
on November 18,2012 | 07:46PM
KekoaBradshaw wrote:
Let's get the topic back to Twinkies.
on November 19,2012 | 09:40AM
Highinthesierras wrote:
Twinkies will survive, not the UNION. More poetic, and economic justice, would be welcome, for example, if this could repeat itself with HSTA.
on November 19,2012 | 06:07AM
loquaciousone wrote:
One of the laid-off workers during an interview stated, "I'm glad that they took this action". What was left unsaid is that, "I'm a lazy arse person and only want to sit on my couch and collect unemployment and foodstamps."
on November 19,2012 | 06:11AM
magnod wrote:
Extra union workers at the other factories will get more work, with a better company guiding them. 80% bonuses executives? Common, poor management and product development clearly killed off Hostess.
on November 19,2012 | 06:38AM
KekoaBradshaw wrote:
Better not let Bain Capital buy Hostess, or else Twinkies, Ho-Hos and Ding Dong's will be made in China.
on November 19,2012 | 09:38AM
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