Private-equity firm considers bid for Twinkie maker
Wikimedia/Larry D. Moore
Don’t sound Taps too soon, Twinkie lovers. Those golden pastries are rumored to be nigh invincible, and they may yet prove able to survive even the liquidation Hostess Brands Inc. announced yesterday, with a little help from the owner of PBR.
C. Dean Metropoulos & Co., the Greenwich, Conn.-based private-equity firm that bought Pabst Brewing Co. in 2010, told Bloomberg that it is considering an offer to buy Hostess. The Twinkie maker seems like a natural fit for the firm, which specializes in buying and reviving struggling brands like Chef Boyardee and Bumblebee Tuna, and has had its eye on the 82-year-old vendor of DingDongs, Ho Hos, and Hostess Cupcakes for some time now.
“Our family would love to purchase these iconic brands,” said Daren Metropoulos, a principal at the firm. “We have analyzed this opportunity very carefully for a few years now.”
The Hostess liquidation was just announced yesterday, and there's no word on other bidders or interested parties. But Metropoulos told Bloomberg that the company was “fully prepared to participate in any process involving selling the brands,” so don’t be surprised if fried Twinkies start showing up on the menus at your friendly neighborhood hipster bars.
PBR parent a lead bidder for Twinkies, other Hostess cake brands
The dismantling of Hostess Brands Inc. continued this week as bidders, including the owner of Pabst Brewing Co., emerged to buy the bankrupt company’s bread and cake brands.
C. Dean Metropoulos & Co., the private equity firm that owns the popular Pabst beer label, is one of the likely stalking horse bidders for Hostess cake brands such as Twinkies, Ho Hos, Ding Dongs and CupCakes, according to a person close to the deal.
Metropoulos would be joined by Apollo Global Management, a private equity firm that owns major companies such as Carl’s Jr. parent CKE, the source said.
The stalking horse bidder sets the auction standard for other prospective buyers. Hostess’ cake brands, with their long history and cult appeal, are seen as the crown jewel in the company’s portfolio of assets.
Hostess, based in Irving, Texas, filed for Chapter 11 bankruptcy a year ago. In November, a federal bankruptcy judge gave Hostess the go-ahead to wind down after failed negotiations with its striking bakers union.
Also this week, two other firms offered to buy some of Hostess’ bread brands and the company’s Drake’s snack segment.
United States Bakery Inc., based in Portland, Ore., offered $28.9 million Monday to buy Sweetheart, Eddy’s and other bread brands from Hostess.
McKee Foods Corp. of Tennessee, which makes Little Debbie snacks, said it wants to take over Drake’s brands, such as Ring Dings and Yodels, for $27.5 million.
Earlier this month, Hostess agreed to sell a large of chunk of its bread holdings -- including Wonder and Nature’s Pride -- to Flowers Food for $290 million.
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Twinkie Lovers, Don't Give Up Hope: PBR Owner Might Buy Hostess
If news of Hostess' impending liquidation has got you stuffing Twinkies and Wonder Bread into the pockets of your skinny jeans, there's hope yet: Pabst Brewing Co.'s owner might make a bid for Hostess' brands.
C. Dean Metropoulos and Co., the Connecticut-based private equity firm behind the maker of every good hipster's favorite tallboy, has been mulling over a Hostess purchase since before the company announced that it was seeking a shutdown yesterday. "Our family would love to purchase these iconic brands," Daren Metropolous, a principal at the firm, told Bloomberg News. "We've analyzed this opportunity for a few years now."
The firm has purchased other brands in financial peril before, like Chef Boyardee and Bumble Bee Tuna. They bought Pabst in 2010 for $250 million, or, as we like to think of it, roughly 83 million happy hour specials. And while there's no word yet on whether they'll finalize a bid, C. Dean Metropoulos and Co. says they're "fully prepared to participate in any process involving selling the brand," which we assume means you can expect to see a Ho Ho paired with a beer and whiskey shot at Trash Bar.
Pabst Blue Ribbon Might Just Save Twinkies from Oblivion
These are a few of our favorite things…Fear not, lovers of Hohos and Twinkies, the beloved, beleaguered, bankrupt brand Hostess may soon be resuscitated by a company whose signature product is equally cheap, delicious, and (actually) addictive. The owner of Pabst Blue Ribbon has announced his intention to buy and rescue Hostess’s “cakes division”, which filed for bankruptcy late last year. Meanwhile, closer to home, Tastykake owner Flowers Foods is the frontrunner to take over Hostess’s “non-cake” division (Wonderbread, etc.).
While things looked dire mere months ago for the American staple, a revived Hostess run by Tastykake and Pabst seems like a recipe for good times. Think: late night Hostess food trucks, or signature Hostess bakeries with liquor licenses. [PBJ]
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The Heir to the Hostess Fortune Just Bought the Playboy Mansion
Back in January, reports first surfaced that Hugh Hefner and Playboy Enterprises were finally ready to sell the Playboy Mansion, the famed Los Angeles party house that became a symbol of sexual reverie and decadence throughout much of the 1970s. Initially asking $200 million for the six-acre, 89-year-old estate, for months it seemed Hefner was struggling to find the right buyer.
We're guessing the legendary adult magazine publisher had to find a successor who would uphold the good name of the mansion—perhaps someone who also owed his wealth to one of the seven deadly sins. While Hefner clearly has the market cornered on lust, it appears the 90-year-old womanizer finally found the perfect buyer this week in Daren Metropoulos, the heir to the glutinous, Twinkie-pushing Hostess fortune. While in January TMZ speculated that the $200 million asking price was incredibly unrealistic, imagining bids closer to $80 and $90 million, according to the Guardian, Metropoulos has agreed to play close to full amount.
“We can confirm that the Playboy Mansion is in escrow with Daren Metropoulos as the buyer,” a spokesperson for Playboy Enterprises told the Guardian this week. “Due to confidentiality restrictions, we are not able to comment on any specifics, including what contingencies need to be cleared to close the sale.”
The 32-year-old "Twinkie King" is the son of a a private equity entrepreneur who's made billions over the years buying and selling major companies like PBR, Ghiradelli Chocolate, Perrier-Jouet, and, yes, Hostess. According to the Guardian, Metropoulos currently lives in an $18 million home next door, and bought the 22,000-square-foot mansion in the hopes of connecting the two properties.
While $200 million sounds like a lot of money—no matter how many packs of Ho Hos and Ding Dongs you're slinging— the house also may not be in the best shape. As Muchies points out, there was an outbreak of Legionnaires disease in the infamous grotto in 2011, causing 123 people to fall ill. A 2010 memoir from a former Playmate, Izabella St. James, also claims that the house is in disrepair, with Hefner's dog " regularly relieving himself" in the hallway.
"Although we all did our best to decorate our rooms and make them homey, the mattresses on our beds were disgusting—old, worn and stained,” she wrote. “The sheets were past their best, too.”
Still, there's even another catch. According to the Guardian, Hefner gets to continue living in the mansion until he dies. Even so, Metropoulos claims he's more interested in the estate for its history and architecture than its celebrity status.
"The heritage of this property transcends its celebrity, and to have the opportunity to serve as its steward would be a true privilege,” Metropoulos told the Wall Street Journal.
Starting Monday, you can buy shares in Hostess’ Twinkies once again
Hostess Brands, the owner of Twinkies, Ding Dongs and other snack food classics, will once again be a public company.
The Kansas City company will start trading Monday on the Nasdaq with the ticker symbol TWNK. For the nearly 90-year-old Hostess, its return to the public market is an attempt to distance itself from a rollicking past that includes two bankruptcies and a long list of owners.
Gores Group, the Beverly Hills private equity group, is now a major shareholder in the snack-cake maker. On Friday, Gores Holdings, a company created last year with the express purpose of acquiring a company with growth prospects, completed its acquisition of Hostess in a $2.3-billion deal.
“It’s a fantastic brand,” said Mark Stone, chief executive of Gores Holdings. “We think it’s an outstanding platform to extend Hostess further into food service or in-store bakery or snacking in general.”
Hostess is not going public through a traditional initial public offering. Instead, it is using an increasingly favored method that lets companies go public without the hurdles of an IPO. When Gores Holdings, which is already a public company, bought Hostess, it changed its own name to Hostess Brands and adopted the new ticker symbol.
“It’s a more effective and efficient way for them to become a public company,” Stone said. “They have certainty on timing and ownership.”
Alec Gores, chief executive of the Gores Group, said he sees “a lot of potential” for future growth in the snack food sector.
“Out of all the deals we looked at, it was by far the best we saw,” he said.
Billionaire food magnate C. Dean Metropoulos and New York private equity firm Apollo Global Management bought the iconic Hostess brands, including Twinkies and Ho Hos, in 2013 after the company filed for bankruptcy the year before. Metropoulos, who serves as executive chairman of Hostess, still holds a big stake in the company along with other family members.
Metropoulos worked to turn around the company by cutting down on distribution costs and also retooling recipes to extend shelf life for its products to 60 days from 26 days, Stone said.
Stone said that Hostess will look toward serving restaurants and cafeterias, as well as expanding into the fresh bakery section of grocery stores. He said the company could also roll out healthier options, but won’t turn its back on its history of offering highly caloric snacks.
“Hostess will not shy away from the fact it is an indulgent treat,” he said.
As for the new ticker symbol, Stone laughed and admitted that it was a subject that was “warmly debated” within the company. He said Metropoulos insisted on TWNK, however, because he considers it the foundation for Hostess.
“Everyone has their own opinion,” he said. “It’s almost like coming up with a company name.”
Hostess Prepares to Liquidate, Taxpayers Await Bill
After a court mandated mediation between Hostess and the Bakery, Confectionery, Tobacco Workers and Grain Millers Union fell through late on Tuesday, a Wednesday ruling by Judge Robert D. Drain of the Southern District of New York returns the company to a &aposliquidation scenario,&apos which will put the company&aposs assets up for sale and cost 15,000 workers their job on the eve of Thanksgiving.
The wind down may also put millions of dollars in pension obligations on the government&aposs books.
While job losses and plant closings are the worst part of Hostess Brands demise - company CEO Gregory Rayburn said in court 15,000 workers will be fired today and a further 3,200 workers will be retained to maintain plant as asset sales loom -- the company&aposs failure may raise new questions as to whether private equity investors are using bankruptcy courts to extract investments at the expense of taxpayers.
the company also said it would terminate its single and multi-employer pension plans.
Judge Drain&aposs approval of Hostess&aposs liquidation on Wednesday means thousands of employee pension plans are going to fall into the hands of the
Pension Benefit Guaranty Corporation
, a struggling federal agency that said on Friday its financial woes may force it to draw taxpayer support.
As part of Hostess Brands liquidation filing, the company said it would terminate its pension, with roughly 2,300 employees in the company&aposs single-employer plan falling under PBGC&aposs guaranty, according to an agency statement. The company&aposs larger multi-employer plan may also get some PBGC support, while potentially not needing a full guarantee because losses could be mutualized.
how private equity investors may be using the PBGC&aposs pension guarantees to
Hostess&apos liquidation -- just like the recent bankruptcies of well known companies like
Friendly&aposs Ice Cream
-- raises the prospect that sophisticated private equity and distressed debt hedge fund investors are using courts to cast off unwanted pensions on U.S. taxpayers and put a losing investment back on the track.
Consider that subsequent with Hostess&aposs liquidation plans, the
Pension Benefit Guaranty Corporation
disclosed on Friday that its pension plan insurance deficit grew to a record $34 billion this year, the biggest shortfall in the federal agency&aposs history. PBGC guarantees employee pension plans after a company goes belly up, securing the retirement of roughly 43 million U.S. workers.
While PBGC doesn&apost take government money directly - it&aposs funded by way of insurance premiums and portfolio returns - the agency&aposs head said on Friday that a growing deficit raises the prospect of taxpayer support.
In a statement released with the agency&aposs bleak outlook, PBGC Director Joshua Gotbaum attributed the plan&aposs shortfall on an inability to set premiums for member companies and noted that the agency&aposs deficit may put taxpayers at risk for the first time in its 38-year history.
"PBGC may face for the first time the need for taxpayer funds," Gotbaum said on Friday.
As taxpayers brace for a prospective bailout of PBGC -- which may soon include Hostess Brands a $50 million single employer plan shortfall - scores of private equity investors and corporations are reportedly lining up to pick over the assets of Hostess, the maker of consumer fattening favorites such as Ho Hos and Twinkies.
indicates private equity firm
might bid on Hostess Brands as a going concern. However, the report doesn&apost specify how pension obligations would be dealt with following the Friday termination of employee plans.
increased its line of credit, in a move analysts speculated might pave the way for a bid on some Hostess assets. Pabst Blue Ribbon owner C. Dean Metropoulos & Co. is also rumored as an interested party, among prospective reported bidders for Hostess or its individual brands that includes
will be running the sale of Hostess&aposs individual brands, according to a
will coordinate sales of Hostess Brands assets, such as its 33 bakeries and 565 distribution centers.
Joshua Scherer of Perella Weinberg said at a bankruptcy hearing Hostess Brands may generate roughly $1 billion from asset sales, highlighting "intense competition" for the company&aposs individual brands.
Sun Capital&aposs interest in Hostess may very well underscore how private equity firms use PBGC guarantees to pave the way for profitable investments. In January, the Center for Economic Policy Research
Friendly&aposs Ice Cream&aposs
2011 bankruptcy to wipe 6,000 employee pensions from the company&aposs books. In that deal, the PBGC accused the buyout firm of fraud.
After filing for bankruptcy in January, Hostess tried to renegotiate pay and benefit packages with the company&aposs unionized workers, which included near double digit salary cuts, a multi-year suspension of pension plan payments and a big cut in funding for employee health plans. In response to the deal, Hostess&aposs bakery worker union went on strike to protest the cuts earlier in November, the company said it would close operations for good were a deal not reached expediently.
While Hostess broke ground with the Teamsters, it was unable to reach a deal with the bakery union, even after Tuesday&aposs mediation. In trying to negotiate a deal, the private equity-owned company took widespread criticism for mismanagement, executive bonuses, high debt levels, and unfair practices tied to pension plan funding from the Teamsters and bakery workers.
In Hostess Brands Jan. 2012
, the company&aposs biggest unsecured creditor was The Confectionery Union & Industry International Pension Fund, a unionized employee plan with a near $944 million pension claim.
Further down the list of financial losers in Hostess Brands bankruptcy and potential dissolution are the company&aposs hedge fund investors, which include
Monarch Alternative Capital
Silver Point Capital
The size of the near $1 billion union pension claim is likely, in part, because Hostess&aposs hedge fund owners stopped contributing to the company&aposs pension plan in August 2011, as a result of bitter labor negotiations and deteriorating finances.
Its too be seen how Hostess Brands liquidation plans play out, but taxpayers should be weary that the company&aposs pension liabilities fall on their books as private equity investors circle the company for an investment.
The Federal Trade Commission accused the baker of making false nutritional claims. Wonder bread, the F.T.C. said, was just a standardized enriched bread, sugar was the primary ingredient in Hostess snack cakes and weight-loss claims for Profile Bread were false.
Dan White was convicted of shooting to death Mayor George Moscone of San Francisco and fellow supervisor Harvey Milk. Mr. White’s lawyer argued that his client had a “diminished capacity,” in part because he had an addiction to sugary junk food. The jury convicted Mr. White of voluntary manslaughter rather than murder.
Hostess bets on Twinkies as Pabst Blue Ribbon of junk food
It's a playbook that worked with Pabst Blue Ribbon: Breathe new life into a moribund brand by cultivating hipster credentials. Now, the investors who helped revive Pabst beer are taking Hostess Brands public, banking on introducing a new generation of consumers to Twinkies, the company's most famous baked product.
Metropoulos & Co., the private equity firm founded by billionaire C. Dean Metropoulos, made a killing on Pabst, netting a profit of more than $450 million four years after the investment firm acquired the brewing company. Sales climbed steadily as the new owners cultivated the brand's aura, sponsoring concerts and burlesque festivals and selling PBR trucker hats and jackets. That deft marketing helped transform the light lager into the brew of choice for millions of young image-conscious American beer drinkers. Can Twinkies also be cool again?
It's a risky bet. The yellow sponge cake tube, first introduced in 1930, is an American pop-culture icon. But nostalgia for the sugar-filled, artificially colored snack may go only so far with today's health-conscious customers.
The new owners are "fighting gravitational forces in the world of food that are very different than the beer market," said Allen Adamson, former North American chairman of the branding company Landor Associates. "With Twinkies, they have to get people to consume a product that is bucking all the health trends."
Metropoulos and Apollo Global Management, who bought Hostess in 2013, are betting good money on the future of Twinkies. And they're now joining forces with other investors to take the sweet-snack maker public. Twinkies will be the centerpiece of the company's portfolio, including new varieties to be rolled out later this year. Frozen fried Twinkies anyone?
"Hostess has incredible brand power," William Toler, chief executive officer of Hostess, said on a conference call. "It has an amazing emotional connection with consumers."
Hostess has been close to extinction twice in the last decade as consumers turned away from many of the grocery staples that long dominated shelves. Processed sugar, in particular, has been branded a health boogeyman. Hostess emerged from bankruptcy in 2009, then went under again roughly three years later.
Much to the horror of junk-food aficionados, Twinkies disappeared from store shelves for about seven months after its then-owner filed for bankruptcy in 2012 and planned to liquidate the company, spurring laments from fans who worried the iconic cakes were gone for good.
Apollo and Metropoulos rode to the rescue the following year, paying about $410 million for the brand. The new management has slashed jobs and transportation costs and and boosted distribution since taking over. To help keep trucking costs down, Hostess more than doubled the average shelf life of its products to 65 days. A long-held urban legend has it that chemical-laden Twinkies could stay fresh for years, if not decades. But they are fresh baked goods that use "natural ingredients" as preservatives, according to Hostess.
Hostess sales plummeted when Twinkies disappeared from stores but have rebounded under the new owners to roughly $650 million in 2015 and are forecast to grow 11 percent to $722 million this year, according to a company presentation.
Hostess is counting on Twinkies' strong brand sparking a youth rebellion to the healthy food movement as it moves toward a public offering later this year. A brand like Twinkies, which has achieved a certain pop-culture status, might have enough cache for customers to set aside their sugar aversion.
"They get a lot of press for being extremely unhealthy," said Emily Balsamo, an analyst at the research firm Euromonitor. "There's a trend to that kind of indulgence."