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Flowers Foods emerges as first stalking horse bidder for Hostess Brands' assets

By Elaine WATSON , 11-Jan-2013
Last updated on 17-Jan-2013 at 18:23 GMT

Georgia-based Flowers Foods has emerged as the first ‘stalking horse’ bidder for assets from bankrupt baker Hostess Brands.

In a statement released late Friday, the firm said it had signed two asset purchase agreements with Hostess.

One provides for the purchase of the Wonderbread, Nature's Pride, Merita, Home Pride and Butternut bread brands; 20 bakeries; and approximately 38 depots for a purchase price of $360m.

The other provides for the purchase of the Beefsteak brand for $30m.

Flowers Foods: This agreement is consistent with Flowers Foods' long-term growth objectives

If they are approved by the bankruptcy court, the bids would then be subject to a competitive auction process to be held several weeks from now, said Flowers Foods chairman and chief executive George E. Deese.

This agreement is consistent with Flowers Foods' long-term growth objectives to reach significantly more of the U.S. population with its fresh breads, buns, and rolls.

"We believe these assets would enhance our ability, over time, to provide more U.S. consumers with quality baked foods at a good value through existing and new retail and foodservice customers."

Based on the current bid price, Flowers would expect the transactions to be accretive to earnings in 2013, said Deese, who plans to finance the transactions through a mix of available cash on hand and debt.

Any purchase would require approval by regulators and U.S. Bankruptcy Judge Robert Drain in White Plains, New York.

We expect to sell substantially all of the company’s assets through this means

Speaking to Foodnavigator-USA last week, a spokesman for Hostess Brands said bosses expect to establish up to six ‘stalking horse’ bidders for its iconic bakery brands.

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.  

He added: “We expect to establish up to six stalking horse bidders and expect to sell substantially all of the company’s assets through this means... It is likely that the stalking horse bids will be presented to the court in chunks. How many, I can’t say.

"After stalking horse bidders are selected, the auction process takes several more weeks. The process will become much clearer once the company files its bid motions."

Hostess's stable of bread brands includes Wonder Bread, Nature’s Pride, Home Pride, Merita and Butternut.

Its snack cake brands include Twinkies, Ding Dongs and Ho Hos.

It also sells Devil Dogs, Funny Bones, and Yodels under the Drake's brand; and Dolly Madison cakes, which include Coffee Cakes and Zingers.

Hostess chairman and CEO Gregory Rayburn said in a statement: "We are pleased with the Flowers offers and look forward to a robust auction process that will allow these iconic brands to continue and to maximize value for all of the company’s stakeholders.

"We also continue to negotiate with parties interested in purchasing our snack cake business and remaining bread brands and expect to select additional stalking horse bidders as soon as reasonably practicable.”

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