Hostess Gets OK to Begin Winding Down Business

chocolate TwinkiesBy CANDICE CHOI, AP Food Industry Writer

WHITE PLAINS, N.Y. (AP) - A bankruptcy court judge on Wednesday approved a request by Hostess Brands Inc. to begin winding down its operations.

The ruling came Wednesday after the maker of Twinkies, Ding Dongs and Wonder Bread failed in last-ditch negotiations to end a strike by its second-largest union.

Hostess now has the green light to terminate the jobs of its 18,000 workers without risking legal action, and to sell off its brands.

In court Wednesday, Hostess said it needed to begin the liquidation process quickly to take advantage of outside interest in its brands, which a banker said could fetch up to $2.4 billion. That's about how much Hostess generates in annual sales.

The banker, Joshua Scherer of Perella Weinberg Partners, told the court 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 bankruptcy-court hearing in White Plains, N.Y.

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

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

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

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 three dozen plants late last week after it said the strike by the bakery union hurt its ability to maintain normal production.

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 were given last year, as the company was spiraling down toward bankruptcy.

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

The company's announcement last week that it would move to liquidate prompted a rush on Hostess treats across the country, with many businesses selling out of Twinkies within hours.

Even if Hostess goes out of business, its popular brands will likely find a second life after being snapped up by buyers. The company says several potential buyers have expressed interest in the brands. Although Hostess' sales have been declining in recent years, the company still does about $2.5 billion in business each year. Twinkies alone brought in $68 million so far this year.

Hostess Twinkie: Baby Come Back!

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Merry Christmas from BCTGM!

November 27 2012 at 12:49 AM Report abuse rate up rate down Reply

I WONDER if the TWINKIE in the white house will bail out the maker of HO-HOs?

November 26 2012 at 9:20 PM Report abuse rate up rate down Reply
1 reply to maa2626's comment

No... he won't!

November 27 2012 at 12:44 AM Report abuse rate up rate down Reply
oscar the grouch

When are these dopey Union bosses going to realize that they have to make CONCESSIONS in order to SAVE jobs. for crying out loud we even got the Republicans to realize this now.

November 26 2012 at 4:00 PM Report abuse -2 rate up rate down Reply
1 reply to oscar the grouch's comment

Are you still knocking the bottom out of miss piggy ?

November 26 2012 at 4:14 PM Report abuse +1 rate up rate down Reply

Here's the story of "evil" Ripplewood Holdings ownership of Hostess (courtesy of the NY Times, no less):

Ripplewood, which was founded by Timothy C. Collins, a major Democratic donor, is expected to lose most, if not all, of the $130 million or so it invested in Hostess. The company’s lenders, led by Silver Point Capital and Monarch Alternative Capital, are not expected to fare well either.

The behind-the-scenes tale of Hostess and Ripplewood may be the opposite of a project to buy it, strip it and flip it. When Mr. Collins originally looked at Hostess, he was trying to make investments in troubled companies with union workers. He was convinced that he could work with labor organizations to turn around iconic American businesses, and he hoped Hostess would become a model for similar deals.

Early on, Mr. Collins sought out Richard A. Gephardt, the former House majority leader, who had become a consultant on labor issues, to help Ripplewood acquire Hostess and work with its unions. Mr. Collins had previously been a donor to Mr. Gephardt’s election campaigns, according to an article in Fortune magazine this year that described the relationship.

It was Mr. Collins’s relationship with Mr. Gephardt — a Democrat and longtime friend of labor — that helped make the deal happen in the first place.

While Ripplewood sought significant concessions from the unions in 2009, some insiders and outside analysts privately suggested that Ripplewood did not fight hard enough for even greater givebacks from the unions in the bankruptcy process — savings worth $110 million — perhaps as a function of Mr. Collins’s relationship with Mr. Gephardt. In addition, the company was saddled with $670 million in debt, which had jumped by about $200 million as part of the sale during bankruptcy.

Ripplewood’s luck — and its investment thesis — could not have been worse. With the sputtering economy, the increase in commodity costs, pressure from competitors that were consolidating and out-of-whack labor costs, Hostess’s fate seemed assured from nearly the beginning. Still, Ripplewood continued to throw good money after bad trying to keep Hostess from faltering.

And unlike some of the horror stories we hear about private equity firms paying themselves huge dividends and leveraging their companies even further, Ripplewood didn’t do that.

November 26 2012 at 2:34 PM Report abuse +2 rate up rate down Reply

This is what happens when you allow a union in your shop! It is a shame that the public is so swayed by the false claims of the low fat diet food, which replace the calories with sugar! The hostess product are part of Americiana and hopefull someone who understands how to run a non union shop will buy the products and start making those delicious treats again. Unions destroy jobs and countries.

November 26 2012 at 12:58 PM Report abuse +1 rate up rate down Reply

Under Obama the rich will get poorer & so will the middle class & all this while our ineffective two party system gets less productive.

Would Romney done any better?

Only one answer makes sense vote out both parties.

November 26 2012 at 12:21 PM Report abuse +1 rate up rate down Reply

This is just one of many businesses that will fail under Obama. Look for 20% unemployment and 20% inflation by the end of Obama's nest four years.

November 26 2012 at 11:56 AM Report abuse rate up rate down Reply

til I saw the draft which was of $9136, I have faith cousin realey erning money part time at there computar.. there uncles cousin has been doing this 4 only about 11 months and resently paid the loans on their mini mansion and purchased a great Toyota. this is where I went, -+-+-+ -+-+-+

November 25 2012 at 2:54 PM Report abuse -1 rate up rate down Reply

Evan is a Twinkie.

November 24 2012 at 7:04 PM Report abuse +3 rate up rate down Reply

Brother Somey, I bought us a new Barry blow up doll, so when we get done burning stuff up in the streets and defecating on cop cars, we can get have fun even after raping those white girls a couple of tents down.

November 23 2012 at 7:59 PM Report abuse +2 rate up rate down Reply
1 reply to evanbartheld's comment

I'm so glad you have found some sense, mrspelosi.

November 24 2012 at 7:24 PM Report abuse +3 rate up rate down Reply