Will someone step into the Hostess breach?

by Eric Schroeder
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IRVING, TEXAS — Since Hostess Brands, Inc. announced on Nov. 15 that it would shutter operations and move to liquidate its assets, the media has been rife with speculation over companies and private equity firms poised to step forward as potential buyers for the company in part or as an ongoing concern. The list ranges from the largest players in the wholesale bread industry to relatively obscure investment firms with no previous experience in the food industry. While not an exhaustive roster of everyone who has been mentioned as a potential suitor, the list includes:

Sun Capital Partners, Inc.
Headquarters: Boca Raton, Fla.
Source: Fortune

With assets under management totaling $8 billion, Sun Capital affiliates have invested in more than 305 companies worldwide since the group’s inception in 1995, with combined sales in excess of $45 billion.

Sun Capital’s investments in the food and beverage space include: Contessa Premium Foods, a U.S. processor and distributor of seafood and frozen convenience meals; Creekstone Farms Premium Beef, a beef processor whose customer base is 50% food service and 50% retail; and Harry’s Fresh Foods, a producer of home-style refrigerated foods that serve the retail and food service markets with soups, entrees, sides, sauces and desserts.

“I think that we could offer a slightly better, more labor-friendly deal than what was on the table last week,” Marc Leder, co-chief executive officer of Sun Capital, told Fortune.

C. Dean Metropoulos & Co.
Headquarters: Greenwich, Conn.
Source: Businessweek

Metropoulos has been a “player” in grain-based foods for many years, repeatedly appearing as a buyer or a suitor in the industry. Over the past 25 years, Metropoulos & Co. has invested in and managed several branded consumer businesses assembled through more than 65 acquisitions in the United States, Europe and Latin America involving more than $10 billion. These businesses include Stella Foods, The Morningstar Group, Ghiradelli Chocolate, International Home Foods (Chef Boyardee, PAM, Bumble Bee Seafood, Gulden's mustard and other brands), Pinnacle Foods (Swanson, Hungry Man, Vlasic pickles and other brands), which merged with Aurora Foods (Dunkin Hines, Aunt Jemima, Lenders bagels and other well-known brands), Mumm and Perrier Jouet Champagnes of France, Hillsdown Holdings of the U.K., Del Monte Foods of Mexico among others.

“Our family would love to purchase these iconic brands,” Daren Metropoulos, a principal at Metropoulos & Co. told Businessweek. “We are actively pursuing this deal as no doubt strategics will also.”

Hurst Capital LLLP
Headquarters: Sarasota, Fla.
Source: Sarasota Herald Tribune

The company, which is run by 26-year-old Austin Hurst and his twin brother, Zach, has never completed an acquisition larger than about $1 million, but has filed a letter of intent that details its multimillion dollar offer to acquire all the assets of Hostess Brands.

Hurst Capital maintains a diverse range of investments spanning web technology and consumer products, including a full-service design and development agency named Dominant Design Group, and Empirical Sports, L.L.C., which makes The Home Catcher, a baseball pitching training aid.

“It’s true, we don’t have any experience in consumer brands,” Austin Hurst, Hurst Capital’s managing general partner, told the Sarasota Herald Tribune. “And this would be the biggest deal we’ve ever done.”

Flowers Foods, Inc.
Headquarters: Thomasville, Ga.
Source: Chicago Tribune

Flowers Foods is the second-largest producer and marketer of packaged bakery foods for retail and food service customers in the United States with 2011 sales of $2.8 billion. Flowers operates 44 bakeries that produce a wide range of bakery products. These products are sold through a direct-store delivery network with access to approximately 70% of the U.S. population in the East, South, and Southwest as well as in certain markets in California. Select Flowers products are sold nationwide through customers' delivery systems. Among the company’s top brands are Nature’s Own and Tastykake.

Flowers on Nov. 19 amended its $500 million credit facility in a way that gives it a new five-year term and modest improvements in pricing. The company said the loan may be used for capital expenditures, acquisition financing, refinancing of debts, dividends or share repurchases.

“This amendment to our credit facility positions us to take advantage of an assortment of opportunities as we work to achieve our expansion goals,” said R. Steve Kinsey, chief financial officer.

Grupo Bimbo S.A.B. de C.V.
Headquarters: Mexico City
Source: Christian Science Monitor

Grupo Bimbo is one of the world’s largest baking companies, with 153 plants and more than 1,000 distribution centers strategically located in 19 countries of America and Asia.

Through its main subsidiaries, the company produces, distributes and markets 10,000 products within the categories of sliced bread, sweet baked goods, home-made type pastry, cookies, English muffins, cereal bars, confectionary, chocolates, sweet and salted snacks, packaged corn tortillas and wheat flour tortillas, tostadas, cajeta and pre-packaged food, among others. Additionally, the company has more than 150 trademarks, including: Bimbo, Marinela, Tía Rosa, Lara, El Globo, Barcel, Ricolino, Oroweat, Arnold, Mrs. Baird’s, Thomas’, Brownberry, Enternmann’s, Ideal, Plus Vita, Pullman, Sara Lee and Monarca, among others. The company also has one of the world’s largest distribution networks with more than 51,000 routes and more than 127,000 employees.

In an interview with Bloomberg Television, Hostess chief executive officer Gregory Rayburn said Grupo Bimbo is not a potential bidder for Hostess.

“One misconception in the market is that Bimbo would be a buyer and bakery leadership told us in several plants that Bimbo would come in and buy, which is absurd,” Mr. Rayburn said. But he pointed to Bimbo’s agreement with the U.S. Department of Justice to sell some Sara Lee brands in order to complete its acquisition of Sara Lee’s North American bakery business as an example of why it won’t happen.
“Due to antitrust, it would never happen,” he said.

McKee Foods Corp.
Headquarters: Chattanooga, Tenn.
Source: Christian Science Monitor

A privately-held, family-run company has grown from a three-person bakery to a group of companies that employs more than 6,000 and has annual sales in excess of $1 billion. The company’s products are available across the United States, in Canada, Mexico, and Puerto Rico, and on U.S. military bases around the world.

McKee Foods is best known for its line of Little Debbie snack cakes, but the company also makes 27 different family pack snacks and granola cereals under the brand name Sunbelt. The products are found in the granola bar section of retail stores. Recently the company introduced Fieldstone, a brand of cookies, breakfast pastries and other snacks targeted to meet the needs of the food service industry.

Mike Gloekler, a spokesman for McKee Foods Corp., told the Dallas Morning News Hostess is leaving behind a “very damaged business.” Mr. Gloekler expressed skepticism over whether anyone would step forward to buy Hostess as a going concern.

“I don’t know that anybody would risk that,” he said.

ConAgra Foods, Inc.
Headquarters: Omaha, Neb.
Source: ABC News

ConAgra is one of North America’s leading food companies, with brands in 97% of America’s households. The company employs more than 26,000 people and had fiscal 2012 sales of more than $13 billion. The company’s Consumer Foods segment makes and sells branded, private label and customized food products to retail and food service channels, principally in North America, while its Commercial Foods segment makes and sells a variety of specialty food and ingredient products principally to food service, food manufacturing and industrial customers worldwide. The company’s brands include Banquet, Chef Boyardee, Healthy Choice, Marie Callender’s, and Orville Redenbacher’s.

Marcia Mogelonsky, director of insight for Mintel Food & Drink, told The Inquisitor that she believes ConAgra Foods, as “one of the big orphan brand adopters,” could be among the companies interested in purchasing the Twinkies brand. MBN

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READER COMMENTS (12)

By Clifford 12/3/2012 3:00:02 AM
Big Mike, its a business not a charity to keep people employeed. Business is about making money. BBU is a publically held company, if their leadership doesnt make those kind of decisions, then the owners can vote in new leadership. Yeah it sucks for the little guy and hard workers soemtimes but at the same time if it werent for the same system there wouldnt be many of the jobs that there are. Its the same ole thing, what about me, if you make yorself more profitable they will keep you around. Is your bakery making the most of its labor hours? Is your bakery making the most of its materials? Or are your waste over 17%? Do people have jobs that could be combined or do you guys do just enough to get your check instead of doubling your efforts to cut back on labor costs and make your bakery more profitable. Just because the company makes a bunch of money doesnt mean evry bakery is contributing. In too many industries, plants and warehouses are shuttered because the emplyees and unions think its about the worker. News flash! Its not, its about making the most money for the shareholders as possible. And say whatever you want about that, but if somebody at sometime hadnt wanted to be greeded many jobs never would have come to fruition.

By big mike 12/1/2012 6:07:14 PM
all i gots to say is that i work for bimbo baking here in southern California and we have going to have a massive layoff due to the cuts that bimbo wants to do they own a bread label called old country here in southern California they say its going to save them x amounts of dollars in profit but x amount of employees are going to lose there jobs why cuse bimbo states that they do not want any part in delivering to the restaurant industry cuse of fuel and other cost like drive time etc bimbo made millions of dollars in profit and yet they want to eliminate jobs to me that's corporate greed think bout the domino effect its going to be for my fellow workers maybe including myself who knows i just think that sun capital would be a good investor in purchasing the hostess brand

By Steve 11/28/2012 12:04:26 AM
I agree, I think Sun Capital would be a good buyer for all the employees

By mike gulash 11/24/2012 7:22:06 AM
Yes you can't own everything in the world it's called cornering the market and no company can do that, of course bimbo had to sell some plants and i think they where not fined it's the law, or it would be like the terminater movie with skynet owning eveything...oh and i am bctgm memeber and really do not like them too much i think it is a lousy union.............

By mike gulash 11/24/2012 7:22:02 AM
Yes you can't own everything in the world it's called cornering the market and no company can do that, of course bimbo had to sell some plants and i think they where not fined it's the law, or it would be like the terminater movie with skynet owning eveything...oh and i am bctgm memeber and really do not like them too much i think it is a lousy union.............

By mike gulash 11/24/2012 7:10:38 AM
Grupo bimbo did not sell sara lee only pars that did not fit them they still own 75 former sara lee plants

By robert 11/21/2012 10:18:18 AM
if hostess cared bout employees they would give supervisors and ones that kept plants running and making sure quality was up to standards they would give them some sort of compensation there was no incentives and moral was was down not a good place to work for after so many years of sevice put in.how we supposed to support our familys .they did us wrong

By Editor 11/21/2012 8:24:34 AM
Mike G., "Bad" was a typo and has been corrected. Thanks for pointing it out.

By big mike 11/20/2012 8:34:08 PM
i truly believe that sun capital is a good investor in the hostess brand the reason is they want to keep it running the way it was im a bctgm member and i do feel for my 18500 brother & sisters that lost there jobs because of corporate greed grupo bimbo got fined and had to sell sara lee cuse they did it against the us department of justice and they got fined all i have to say is that i hope sun capital does buy it

By David Williams 11/20/2012 7:14:46 PM
Sun Capital has the best idea that fits what our company needs.Innovation, investment, and concern for the employees welfare.

By mike gulash 11/20/2012 4:46:16 PM
Oh yeah and many of the other companies you wrote about in this article also makes sweet goods example flowers bakery makes tastey kake cakes i see no sweet bad goods in theirs you are giving my company a bad wrap and no thers that make the same stuff..

By mike gulash 11/20/2012 4:41:44 PM
Why did you add the world (bad) in between sweet goods? the bimbo article? i work for the sweet good division and proud of it, and feel that is wrong of you added that in there i may not be reading this online or magazine from your company any longer,shame on you....