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Hostess picks next two stalking horse bidders for Drake's and additional bread brands

By Elaine WATSON , 29-Jan-2013

Hostess Brands has selected stalking horse bidders for its Drake's snack cake brand and for its Sweetheart, Eddy's, Standish Farms, and Grandma Emilie's bread brands.

If approved, the stalking horse bids will serve as the opening bids in an auction Hostess is hoping to run on March 15. The final sales will be made to the highest and best bidders, subject to court approval.

Tennessee-based McKee Foods Corporation - which is best-known for its Little Debbie snack cakes - is offering $27.5m for the Drake's brand and certain equipment (Drake’s brands include Ring Dings, Yodels, Devil Dogs, Yankee Doodles, Sunny Doodles, and Drake's Coffee Cake).

Meanwhile, Oregon-based United States Bakery, Inc (Franz Bakery) is offering $28.85m for the Sweetheart, Eddy's, Standish Farms, and Grandma Emilie's bread brands, four bakeries, and 14 depots, plus certain equipment.

"These agreements once again set a strong value for our businesses and we look forward to conducting an auction process that will further enhance the return for Hostess's stakeholders," said Hostess chief executive Gregory Rayburn.

Advanced discussions over Twinkies at al

Hostess has already secured court approval to sell most of its bread brands at auction on February 28 after selecting Flowers Foods as a stalking horse bidder for Beefsteak, Butternut, Home Pride, Merita, Nature's Pride and Wonderbread plus 20 bakeries and 38 depots.

Meanwhile, it is in “advanced discussions with a number of parties for the remainder of the snack cake business [Twinkies, Ding Dongs, Dolly Madison etc] and expects to file an agreement in the near term.”

Asked last week whether this meant days, weeks or months, a spokesman told FoodNavigator-USA last Friday: “I can’t be more specific on the timing of when we might announce a stalking horse bidder for the snacks. ‘Near term’ is as close as I can get.”

A stalking-horse bid is an initial bid on a bankrupt company's assets from an interested buyer chosen by the bankrupt company from a pool of bidders that sets the bar so other bidders can't low-ball the purchase price. Once the stalking horse has made its bid, other potential buyers may submit competing bids.  

Baker’s union: The sooner brands can get back on shelves, the better

David B. Durkee, International President of The Bakery, Confectionery, Tobacco Workers and Grain Millers International Union (BCTGM), told FoodNavigator-USA last week that it was important to get Hostess products back on shelves "before any additional brand erosion occurs"

He added: "Our goal is to work with interested bidders in both the bread and snack cake divisions to preserve jobs and the legacy of these timeless snack cakes and breads.

The BCTGM has a well-trained, sizeable workforce with decades of experience and irreplaceable knowledge and our members provide new owners the best chance of success in a seamless revival of operations."

As to what the best case scenario for BCTGM members that could emerge from this whole process, he said: "Of course the best case scenario would be the re-hiring of all of BCTGM’s 5,000+ workers, and we are hopeful that new owners will recognize the value that our skilled members can bring in resuming operations immediately and getting these brands back on the shelf."

Unpaid wage claims

Meanwhile, Hostess is trying to deal with multiple claims for unpaid wages, leave, shift differentials and severance requests from staff, thousands of whom have been laid off following the firm’s collapse.

Hostess Brands filed for a full shut down and sale of its assets last November after nationwide strikes from members of the BCTGM, who were angered by a pay-cutting deal enforced upon them as part of a recovery plan to lift Hostess out of financial difficulties.

The liquidation led to the closure of 33 bakeries, 565 distribution centers, around 5,500 delivery routes, 570 bakery outlet stores across the US and 18,500 job losses.

McKee Foods and United States Bakery Inc (Franz Bakery)

Privately-held and family-run, Tennessee-based McKee Foods employs than 6,000 staff, and has annual sales in excess of $1bn.

Best-known for its Little Debbie snack cake brand, it also sells granola bars, fruit & grain bars, fruit flavored snacks and granola cereals under the Sunbelt brand; and granola under the Heartland brand produced by its subsidiary, Blue Planet Foods. Its Fieldstone Bakery business produces snacks and cereals for the foodservice market.

Based in Portland, Oregon, Franz Bakery is the largest independent baking company in the Northwest and claims to be the largest family-owned baking company in the Western United States.

Today the firm makes bread, buns, bagels, cookies, and pastries in seven baking facilities in the region, supplying grocery, restaurant, food service and institutional customers in Oregon, Washington, Idaho, Northern California and Montana.    

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