Hostess Brands selects stalking horse bidders for bread brands

Hostess Brands, the bankrupt producer of bakery products in the US, has selected McKee Foods and United States Bakery as the stalking horse bidders for its Drake’s snack cake brand and other bread brands.

McKee Foods, the manufacturer of Little Debbie snack cakes and Sunbelt granola snacks, has offered $27.5m to acquire the Drake’s brand as well as certain equipment.

The Drake’s brand offers products such as Ring Dings, Yodels, Devil Dogs, Yankee Doodles, Sunny Doodles, and Drake’s Coffee Cake.

United States Bakery has agreed to pay $28.85m for Hostess’ Sweetheart, Eddy’s, Standish Farms, and Grandma Emilie’s bread brands, in addition to four bakeries, 14 depots, and certain equipment.

The combined acquisition value under the two stalking horse bids is approximately $56.35m.

Hostess Brands chairman and chief executive officer Gregory Rayburn said that the agreements set a strong value for the company’s businesses, and it seeks to conduct an auction process that will further enhance the return for Hostess’s stakeholders.

"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 $440m," Rayburn said.

"We expect that figure to significantly increase once we announce a stalking horse bidder for the majority of our snack cake business, including Twinkies," he added.

Earlier this month, Flowers Foods, a packaged bakery foods manufacturer, signed two agreements to acquire the majority of the bread brands, bakeries and depots from Hostess Brands for $390m.

The company plans to divest the Hostess snack cake business and the remaining bread business in separate transactions.

Hostess Brands will conduct an auction for the majority of its bread business on 28 February, at the conclusion of which it will choose the highest and best bidders.

The company is also set to hold a second auction for the Drake’s brand and the four bread brands on 15 March.

Hostess Brands filed for bankruptcy in January 2012, declaring assets of $982m and debt of $1.43bn.

In November 2012, Hostess received approval from the US Bankruptcy Court in New York to close its business and sell its assets.

In December, nearly 24 companies participated in the first round of bidding to acquire the assets of Hostess Brands.