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Twinkies maker Hostess says talking with bidders, unions
May 25, 2012 / 1:10 AM / 5 years ago

Twinkies maker Hostess says talking with bidders, unions

LOS ANGELES, May 24 (Reuters) - Bankrupt Hostess Brands Inc, the maker of Twinkies, is in talks with potential buyers and unions as it tries to stave off liquidation of the once-iconic American baked goods company.

"We are in active negotiations with our unions and bidders," said a company spokeswoman, declining to elaborate.

One source familiar with the negotiations said the outcome of talks was far from certain as any deal to sell the company would hinge on Hostess' success in resolving labor issues.

Industry analysts believe private equity firms are likely suitors, while Hostess's brands could also be a target for food companies such as Mexico's Grupo Bimbo and U.S. baker Flower Foods Inc, which on Thursday it was looking for acquisitions in the industry.

"We are positioned to add new bakeries as needed, enter new geographic territories, and make acquisitions as we work to build shareholder value over the long term," Flowers CEO George Deese said. When asked if Flowers was looking at Hostess, a Flowers spokesman declined comment.

A spokeswoman for Grupo Bimbo, one of the world's biggest bakers, which bought Sara Lee Corp's fresh bakery units in the United States last year, was unavailable.

"Given their iconic brands, Hostess's parts are likely worth more than the whole. This could be a once in a lifetime opportunity for someone like a Flowers," said Doug Ehrenkranz, managing director for consumer goods at executive search firm Boyden.

Hostess this month warned all of its 18,500 employees they may be laid off by mailing notices in accordance with a federal law that requires companies to give employees 60 days notice before closing a facility or ordering mass layoffs.

Still, the firm said that process did not necessarily mean any of those events would definitely happen. Hostess has said it hopes to emerge from bankruptcy as a growing company, but its success relies on its search for new capital, and labor negotiations.

Hostess will go back to bankruptcy court on June 5 for a trial on whether it can reject deals with 10 smaller unions, covering collective bargaining agreements for nearly 1,200 employees.


Privately-held Hostess's efforts to terminate collective-bargaining agreements with its two biggest unions, the Teamsters and the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union, which represent about 14,000 of Hostess's 18,000 employees, have so far brought mixed results.

Bankruptcy Judge Robert Drain has said Texas-based Hostess could reject some bargaining agreements with the bakers' union, but ruled against its effort to reject deals with the Teamsters.

The Teamsters declined to comment on Thursday beyond their statement on May 15 when they hailed as a victory Judge Drain's ruling to deny Hostess's motion to reject its labor contracts.

The Teamsters said they recognized the ruling did not solve Hostess' problems. "Unfortunately we've been bogged down in this legal process instead of trying to reach a resolution that all parties could support. We remain committed to finding a solution and urge the company and its lenders to do the same," the union said.

Hostess, which operates around 36 bakeries, filed for Chapter 11 bankruptcy protection for the second time in January. Founded in 1930, Hostess has about $860 million in debt. It filed its first bankruptcy in 2004, citing falling sales, rising ingredient costs, excess capacity and high labor expenses. It closed bakeries and simplified some contracts, but failed to deal with pension and health obligations.

The case is In re: Hostess Brands Inc, U.S. Bankruptcy Court, Southern District of New York, No. 12-22052.

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