Twinkies likely to survive sale of Hostess Brands

Associated Press

DETROIT

Twinkie lovers, relax.

The tasty cream-filled golden spongecakes are likely to survive, even though their maker will be sold in bankruptcy court.

Hostess Brands Inc., baker of Wonder Bread as well as Twinkies, Ding Dongs and Ho Ho’s, will be in a New York bankruptcy courtroom today to start the process of selling itself.

The company, weighed down by debt, management turmoil, rising labor costs and the changing tastes of America, decided Friday that it no longer could make it through a conventional Chapter 11 bankruptcy restructuring. Instead, it’s asking the court for permission to sell assets and go out of business.

But with high brand recognition and $2.5 billion in revenue per year, other companies are interested in bidding for at least pieces of Hostess. Twinkies alone have brought in $68 million in revenue so far this year, which would look good to another snack-maker.

“There’s a huge amount of good will with the commercial brand name,” said John Pottow, a University of Michigan Law School professor who specializes in bankruptcy. “It’s quite conceivable that they can sell the name and recipe for Twinkies to a company that wants to make them.”

Hostess has said it’s received inquiries about buying parts of the company. But spokesman Lance Ignon would not comment on analysts’ reports that Thomasville, Ga.-based Flowers Foods Inc. and private-equity food investment firm Metropoulos & Co. are likely suitors. Metropoulos owns Pabst Brewing Co., and Flowers Foods makes Nature’s Own bread, Tastykake treats and other baked goods. Messages were left for spokesmen for both companies Sunday.

“We think there’s a lot of value in the brands, and we’ll certainly be trying to maximize value, both of the brands and the physical assets,” Ignon said Sunday. He said it’s possible some of Hostess’ bakeries will never return to operation because the industry has too much bakery capacity.

Little will be decided at this afternoon’s hearing before Bankruptcy Judge Robert Drain, Pottow said. The judge eventually will appoint a company that specializes in liquidation to sell the assets, and the sale probably will take six months to a year to complete, Pottow said.

Irving, Texas-based Hostess filed for Chapter 11 bankruptcy protection in January for the second time in less than a decade. Its predecessor company, Interstate Bakeries, sought bankruptcy protection in 2004 and changed its name to Hostess after emerging in 2009.

The company said it was saddled with costs related to its unionized work force. The company had been contributing $100 million a year in pension costs for workers; the new contract offer would have slashed that to $25 million a year, in addition to wage cuts and a 17 percent reduction in health benefits.

Hostess also came under fire this spring after it was revealed that nearly a dozen executives received pay hikes of up to 80 percent last year even as the company was struggling.