Created on: January 14, 2013
Flowers Foods announced Monday that it has acquired five Hostess brands in a hefty $390 million deal that is separated into two agreements, the company stated in a press release. The Thomasville, Georgia-based bakery will be purchasing Wonder, Nature's Pride, Merita, Home Pride and Butternut bread brands, 20 bakeries and about 38 depots for $360 million as well as the Beefsteak brand for an additional $30 million.
The company, owner of such brands as Tastykake, Nature’s Own and Cobblestone Mill, noted that it expects the Hostess purchases to add to its earnings in 2013 and will finance the brands with cash on hand plus debt.
The purchase is subject to the court-approved bankruptcy process started by Hostess. If Flowers Foods’ bids are approved by the court then the bids would be subject to a competitive auction procedure held by the end of February or beginning of March. Hostess has explained in the past that it needs to move quickly in order to capitalize on the outpouring of support and nostalgia started by the bankruptcy announcement.
Flowers Foods maintains 44 bakeries and has reported more than $3 billion in annual sales. Meanwhile, Hostess confirmed that its bread brands generated less than $1 billion in sales last year with Wonder Bread accounting for nearly half of those earnings
“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," said George E. Deese, chairman and chief executive officer of Flowers Foods, in the news release. "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."
Hostess, founded in 1939 and based in Irving, Texas, filed for Chapter 11 bankruptcy protection in November. It sought permission to shut down its business and sell its assets. Much of the blame has fallen to the unions, which launched a strike over finances. After the company shut down, approximately 18,500 employees were laid off.
The workers accused the executives of mismanaging the company and failing to invest in its brands.
It has been confirmed that Hostess CEO Gregory Rayburn is still in negotiations to sell its Twinkies and Drake’s cakes brands with other potential bidders, according to a statement released to the Associated Press. A list of possible buyers is expected to be released in the next few weeks.
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