Speculation swirls on new suitors for Hostess snack cakes

by Eric Schroeder
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NEW YORK — Hostess creditor Silver Point Capital and private equity firm Hurst Capital may make a move to acquire Hostess Brands, Inc.’s snack cake business, according to an article in The New York Post.

According to the Post, Silver Point Capital recently submitted a letter to Hostess’ bankers expressing interest in buying all or part of the Hostess business, while Hurst Capital has formed a partnership with other private equity firms to make an offer.

Silver Point Capital is a Greenwich, Conn.-based hedge fund that specializes in investing in distressed companies. The firm, which issued $75 million in financing to Hostess in January 2012, was formed in 2002 by former Goldman Sachs employees Edward A. Mule and Robert J. O’Shea. It would not be the first time that Silver Point has attempted to acquire a portion of Hostess. The firm in 2009 partnered with then-Hostess chief executive officer Craig Jung to try and buy the business the first time it filed for Chapter 11, but it was bested by private equity firm Ripplewood Holdings.

Headquartered in Sarasota, Fla., Hurst Capital is run by 26-year-old Austin Hurst and his twin brother, Zach. The company never has completed an acquisition larger than about $1 million  but late last year filed a letter of intent that detailed 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.

The next few days will be important ones in deciding the fate of several of Hostess’ biggest brands, including its iconic snack cakes.

Qualified bids for the Hostess and Dolly Madison bids are due by 5 p.m. Eastern Time today, with an auction, if necessary, set for 10 a.m. EST on March 13. A hearing at the bankruptcy court to approve the sale transaction has been scheduled for 10 a.m. EST on March 19. Under a purchase agreement announced Jan. 30, HB Holdings L.L.C., an affiliate of private equity groups Apollo Global Management L.L.C. and Metropoulos & Co., would pay $410 million for the Hostess and Dolly Madison snack cake business.

Qualified bids for the Drake’s brand are due by 5 p.m. EST on March 12, with an auction, if necessary, set for 10 a.m. EST on March 15. A hearing at the bankruptcy court to approve the sale transaction has been scheduled for 10 a.m. EST on April 9. McKee Foods Corp., Collegedale, Tenn., is the stalking horse bidder for the Drake’s snack cake business of Hostess with a bid of $27.5 million. Not included in the transaction are any production or other facilities, including the Hostess plant in Wayne, N.J., where Drake’s snack cakes were baked.
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