Flowers completes Hostess bread asset acquisition
July 22, 2013
by Josh Sosland
THOMASVILLE, GA. -- Flowers Foods, Inc. on July 22 said it has completed its acquisition of 20 baking plants and other “bread assets” from Hostess Brands for $355 million. The transaction brings to an end the liquidation of what for many years was the largest baking company in the United States.
Announcing the transaction’s completion, Allen L. Shiver, president and chief executive officer of Flowers, said Hostess bread brands would be returning to store shelves in the future, but he did not specifically comment on whether or when the various plants acquired would resume operations.
“These assets fit very well with our strategy to grow our fresh baked foods through market expansion and acquisitions,” Mr. Shiver said. “Consumers across much of the country can expect to see these well-known and loved bread brands returning to store shelves over time.”
The Flowers’ bid for most of the Hostess bread assets was accepted early in the year with bankruptcy court approval in March. On July 8, the company received regulatory approval pursuant to the Hart-Scott-Rodino Act. Flowers said the final acquisition price was adjusted down by $5 million as a result of a contemplated purchase price adjustment related to the Butternut trademark.
Questions over whether Flowers would encounter regulatory difficulties in its purchase of the Hostess assets were prompted by two factors. First, the most recent major acquisition in U.S. baking – the Grupo Bimbo S.A.B. purchase of the fresh baking assets of Sara Lee Corp. – led to a requirement of significant divestitures of assets.
Additionally, Grupo Bimbo raised questions about the Flowers acquisition of Hostess in February.
“Flowers’ acquisition of both the Hostess and Sara Lee (California) assets would give Flowers sole control over the three most significant brands in California for ‘traditional’ breads — the sliced bread used for sandwiches and often preferred by families with young children,” Grupo Bimbo said at the time in a legal filing.
Bimbo made the statement in an unsuccessful bid to stop Flowers’ acquisition of Sara Lee assets in a transaction approved with the Department of Justice in October 2012. The ruling left uncertain whether Flowers would be allowed to keep all Hostess assets acquired in connection with the California market.
In its July 22 announcement, Flowers said the Hostess acquisition would strengthen its position as the nation’s second largest baking company “by adding brands and bakeries that will enhance the company’s ability to steadily expand the geographic reach of its fresh breads, buns, rolls, and snack cakes into new markets.”
The company noted it has more than doubled the geographic reach of its fresh bread brands over the last decade, with its products available to 77% of the U.S. population in 2013, up from 38% in 2003. The Hostess acquisition will not lead Flowers to upend its “slow but steady” approach toward expansion, Mr. Shiver said.
“We will continue our methodical market expansion, re-introducing the newly acquired brands into markets we currently serve and into new markets as we steadily expand into new regions of the country,” he explained.
Mr. Shiver also offered a further glimpse into the impact the Hostess bankruptcy has had on Flowers’ business.
“Our team has been keenly focused on serving the needs of our customers and the marketplace, and we are seeing the results of our efforts,” he said. “First quarter sales were up 25.9%, driven primarily by new business gained following Hostess’ exit from the market in November 2012 and by incremental sales from previous acquisitions.”