M&A

Twinkies Maker to Go Public in $2 Billion Deal

Coming back from bankruptcy, Hostess Brands will become a publicly traded company by selling most of its shares for $725 million.
Matthew HellerJuly 5, 2016

Continuing a notable comeback from bankruptcy, Hostess Brands, the maker of Twinkies, Ho Hos and other snacks, said Tuesday it will become a publicly-traded company by selling a majority stake to an affiliate of investment firm Gores Group for $725 million.

Gores Holdings, a special-purpose acquisition or “blank check” company, will pay $375 million for the stake in Hostess Brands, while additional investors, including Gores Group CEO Alec Gores, have committed to invest another $350 million.

The acquisition is expected to close by the end of summer. Gores Holdings will then change its name to Hostess Brands Inc. Hostess’s current majority owners — Apollo Global Management and Metropoulos & Co. — will hold about a 42% combined stake in Gores Holdings.

“Hostess presents a unique opportunity to invest in an iconic brand with strong fundamentals that is poised for continued growth,” Gores said in a news release.

The snack maker, which was founded in 1919, filed for bankruptcy protection in 2012 when it was running an operating loss of more than $1 billion and was overcome by pension costs and strikes. Turnaround experts Apollo and Metropoulos bought the snack-cake brands out of liquidation in 2013 for about $410 million.

As Forbes reports, the new owners “quickly moved to modernize factories, slash delivery costs and lengthen the shelf life of Twinkies.” Hostess had about $650 million in revenue in the year ended May 31 and expects to generate operating profits of roughly $220 million for full-year 2016.

“I have enjoyed working together with Apollo to build a vibrant and exciting company, and we are pleased to partner with the Gores Holdings team as we move to the next stage of Hostess’s growth and expansion,” Hostess’s executive chairman Dean Metropoulos said.

The deal with Gores gives Hostess an enterprise value of $2.3 billion. “Being acquired by a blank-check company will give Hostess a listing on the Nasdaq stock market, where Gores Holdings trades,” The New York Times reported. “That would give Hostess the ability to raise additional capital from the stock markets to pay for acquisitions or pay down some of its debt.”