Wednesday, 23 July 2014
Last updated 2 hours ago
Nov 19 2012 | 11:48am ET
Hostess Brands, the maker of such iconic American foods as the Twinkie and Wonder Bread, make have baked its last cake.
The company, owned by private equity firm Ripplewood Holdings and hedge funds Monarch Alternative Capital and Silver Point Capital, will seek permission today to lay off its workforce and liquidate in federal bankruptcy court in White Plains, N.Y. Hostess announced plans to close and "focus on selling its assets to the highest bidders" last week.
The move comes after members of the Bakery, Confectionary, Tobacco Workers & Grain Millers union began a strike against Hostess on Nov. 9, protesting a proposed contract that would have cut pay, health-care benefits and pension benefits. The company's CEO laid the blame squarely on the union.
"Despite everyone’s considerable efforts to move Hostess out of its restructuring, when we began implementing the company’s last, best and final offer, the Bakers Union chose to stage a crippling strike," Gregory Rayburn said. "This affected Hostess’ ability to continue to make products and service its customers’ needs and pushed Hostess into a wind down scenario."
Most of Hostess' 18,500 workers will be laid off. But the Twinkie, whose potential demise has led to an outpouring of grief and hoarding, will likely survive and be sold as part of Hostess' bankruptcy proceedings. Twinkies have made Hostess $68 million this year, and are expected to garner interest among buyers, among them private equity firm Metropoulos & Co.
The fate of Hostess' other products, including Ding Dongs, Ho Hos, Drakes Cakes and other staples of the American diet, remain unclear, although many are also likely to be sold.
Ripplewood bought Hostess out of bankruptcy in 2009—the company filed for bankruptcy in 2004—with more than $700 million in debt. But that burden has since grown to $2 billion, and new management and marketing teams brought in by the alternative investments firms either failed to work or outright backfired.
In addition to Twinkies, Drake's and Wonder Bread, Hostess owns such well-known brands as Dolly Madison snacks, Eddy's ice cream and Nature's Pride bread.
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