Will Twinkies Find a New Home in Wal-Mart?
While the bankruptcy of Hostess has left Twinkies temporarily without a home, the cream-filled cake will not necessarily leave American pantries forever; as Bloomberg reported on Friday, the company’s assets have begun to receive offers. “A few of the bids are for all the assets, some are for just the cakes or breads businesses, and others are interested in individual Hostess plants or products,” sources told the publication.
Perella Weinberg Partners financial adviser Joshua Scherer told Bloomberg last month that the liquidation sale of the 82-year-old creator of Wonder bread, Ding Dongs, and Ho Hos could generate up to $1 billion for the company’s creditors. Now, with proceedings underway, more than two dozen companies are expected to bid for its assets, including retailers Wal-Mart (NYSE:WMT) and Kroger (NYSE:KR). Grupo Bimbo (GRBMF.PK) and Alpha Baking could make offers as well, but so far Wal-Mart’s interest has drawn the most attention from the media.
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An acquisition of Hostess brands, which “carry a rabid following” according to Forbes, would fit well with Wal-Mart; more than 50 percent of the retailer’s business comes from its grocery sales. However, the snacks’ production would have to be outsourced, most likely to the same companies that manufacture its store-brand products currently, and production was the problem that led to Hostess’ bankruptcy in the first place. As Forbes noted, Kroger already owns production facilities, and therefore beginning Twinkie production would be fairly easy in comparison.
Hostess announced bankruptcy in November after production was hampered by labor disputes. Because the company could not resolve its long conflict with unions, it was forced to make its second trip to bankruptcy court in a decade and sell off its assets.