How Hostess rebounded from bankruptcy(Read article summary)
The maker of Twinkies, which only four years ago filed for bankruptcy, is set to be publicly traded after Gores Holdings acquires the company later this year. The sale comes after Hostess streamlined its operations and eliminated its unionized workforce.
Twinkies are about to go public.
Snack cake company Hostess will soon be publicly traded after the majority of the company is sold to Gores Holdings, a special-purpose acquisition arm of The Gores Group.
The deal, expected to be complete in the third quarter of 2016, will give Hostess a listing on Nasdaq. With an initial enterprise value of $2.3 billion, a presence on the stock market will allow Hostess to raise additional capital. This deal comes just four short years after Hostess filed for bankruptcy.
After a strike by the Baker, Confectionary, Tobacco Workers, and Grain Millers International Union, Hostess filed for Chapter 11 bankruptcy in 2012. Approximately 79 percent of Hostess employees were unionized, and Hostess claims the strike lost the company tens of millions of dollars, contributing to the $860 million of debt Hostess had acquired by November of that year. Because of Hostess’ bankruptcy, 15,000 unionized jobs were lost.
In January 2013, Hostess announced that its brands would be sold in a joint deal with Apollo Global Management LLC and C. Dean Metropoulos & Co., who offered $410 million for a stake in the iconic brand, including the snack cake business and five bakeries. Metropoulos & Company has made a name for itself by purchasing and reviving heritage brands, like Pabst Blue Ribbon. Since 2013, Apollo Global Management and Metropoulos & Company have focused on streamlining the production of Hostess treats.
In an effort to increase efficiency, 600 thrift stores which had formerly sold Hostess products were shuttered. Instead of running 11 factories at 50 percent capacity, Hostess is running four factories at 90 percent capacity. Just last year, Hostess closed the bakery in Chicago where the Twinkie was invented, cutting 400 jobs.
Hostess also made major changes to its workforce. Before the strike and bankruptcy, the majority of Hostess employees were unionized; now none are. Hostess also reduced the number of employees, now employing only 1,800 people where it used to maintain a staff of 2,500.
Though Apollo Global Management and Metropoulos & Company will retain only 42 percent ownership of the company, Hostess' leadership will stay the same. Dean Metropoulos will remain as executive chairman and William Toller will stay on as chief executive officer.
The deal is funded by $375 million in cash from Gores Holdings. Another $350 million will be committed to by institutional investors. Alec Gores, chairman and chief executive of the Gores Group, told the New York Times, “Hostess presents a unique opportunity to invest in an iconic brand with strong fundamentals that is poised for continued growth.”
According to USA Today, Hostess’ revenue projections for 2016 are upwards of $220 million. A promising indicator of what’s to come, consumer spending within the United States rose 1.1 percent in April of this year and .4 percent in May.
Hostess leadership maintain a positive outlook as the deal is finalized. According to the New York Times, Mr. Metropoulos said in a statement, “This new phase in Hostess’ evolution and partnership with the Gores Group and our broader investor partners will continue to propel Hostess into a growing and innovative company with significant reach and potential long into the future.”