Interest in Hostess Doesn't Extend to Getting Their Unions

Here's a story about a Georgia company expressing interest in buying pieces of Hostess, but excluding their unions.

More Suitors Signal Interest in Hostess says this:

"Suitors of various stripes signaled interest Monday in Hostess Brands Inc.

Flowers Foods Inc., a Georgia-based baker, announced it has renegotiated lending terms to allow it to tap additional cash, in what analysts see as a clear sign it is gearing up to buy assets owned by Hostess. . . .

“Clearly they are positioning themselves to be a major player in this process,” said Amit Sharma, an analyst with BMO Capital Markets in an interview. . . .

 Analysts say Flowers has made it clear to investors since Hostess sought bankruptcy protection for a second time in January that it will not buy any asset or brand with a unionized workforce. A Flowers spokesman did not immediately respond to requests for comment Monday.

The bread business has been consolidating over the last few decades, and only three major players besides Hostess are left: industry leader Grupo Bimbo SA; the strong No. 2 player, Flowers Foods; and Pepperidge Farm, which is owned by Campbell Soup Co.

Mexican bakery giant Grupo Bimbo, the U.S.’s largest bakery by sales, has been cited by analysts as a potential but unlikely suitor. Some manufacturing plants or warehouses might be of interest to the company, analysts say, but they say antitrust concerns would make it unlikely for the company to acquire Hostess brands. When the company acquired the North American bakery business of Sara Lee Corp. in 2010, the Justice Department forced it to divest some assets. And because the company has such a large presence in the U.S., it doesn’t have many holes left to fill in, while Flowers is still a mostly regional business. A Grupo Bimbo spokesman declined to comment.

Flowers Foods’ main territories are in the South, though they have recently begun to grow in the Northeast thanks to their acquisition last year of Tasty Baking Co. “They’ve said acquisitions will represent 2% to 5% of their topline growth,” said Mr. Weddington. “This is a very big moment for Flowers to have these assets come to market and give them a way to rapidly and efficiently expand their footprint in the Northern U.S.” Shares rose almost 7% in mid-day trading on the New York Stock exchange on Monday.

Also on Monday, Hurst Capital, LLLP, a small private-equity firm run by 26-year-old twins Austin and Zach Hurst, filed a letter of intent to acquire Hostess assets with the bankruptcy court in New York overseeing the Twinkie-maker’s case.

In an interview, Austin Hurst said the firm doesn’t have the financial wherewithal to act alone, with only about $1 million on hand. Mr. Hurst said he’s counting on billionaire friends, including those who have founded Internet companies, to help on a possible bid. He declined to name them. “We want to be a contender in this race,” he said.

He mused about rehiring some Hostess workers but said he hadn’t thought it through and wouldn’t be interested in assuming existing labor contracts.

Liquidation firm Great American Group Inc. and C. Dean Metropoulos & Co., the owner of beer brands including Pabst Blue Ribbon, last week signaled interest in Hostess’s brands."

SUMMING UP

As part of its expansion plans, Flowers makes sense as a buyer of pieces of Hostess.

That said, it obviously doesn't want a union to come along as part of any deal.

We'll stay tuned as this plays out over the next several days, weeks or months. 

The process has begun.

Thanks. Bob.