Flowers unit bids for Wonder bread - The Deal Pipeline (SAMPLE CONTENT: NEED AN ID?)
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Flowers unit bids for Wonder bread

by Jamie Mason  |  Published January 14, 2013 at 1:35 PM
WonderBreadHostessOldAd.jpgBankrupt Hostess Brands Inc. has secured a $390 million stalking-horse bid for the sale of its national bread business operations from Flowers Foods Inc., the second-largest producer and marketer of packaged bakery foods for retail and foodservice customers in the U.S.

Judge Robert D. Drain of the U.S. Bankruptcy Court for the Southern District of New York in White Plains will consider the approval of the bidding procedures on Jan. 25.

Besides owning Tastykake and other snack cake brands, Thomasville, Ga.-based Flowers owns bread and bun offerings such as Nature's Own, Cobblestone Mills, Sunbeam and European Baker, among others.

According to court papers filed Jan. 11, Flowers Foods subsidiary FBC Georgia LLC has offered $360 million in cash plus the assumption of certain liabilities for Hostess' major bread-related brands, including Wonder, Nature's Pride, Butternut, Home Pride and Merita.

The debtor's Beefsteak, Sweetheart, Grandma Emilie's, Eddy's, JJ Nissen, Colombo and Cotton Holsum brands -- all more regional in nature -- aren't included in the sale, though the stalking-horse bidder has also agreed to buy the company's intellectual property for its Beefsteak brand for $30 million in cash plus the assumption of certain liabilities.

Through the sale, the stalking-horse bidder will buy 20 bakeries in Alabama, California, Colorado, Florida, Iowa, Illinois, Indiana, Kansas, Louisiana, Maine, Missouri, North Carolina, Nevada, Ohio, Oklahoma, Tennessee and Utah. The buyer will also purchase 38 depot locations in the U.S.

Under the proposed bidding procedures, if the stalking-horse bidder doesn't win the auction, it would receive a $12.6 million breakup fee.

Hostess wants to schedule the auction for Feb. 28 and the sale hearing for March 5. The sale would close by April 30.

Competing bidders would have to offer at least the stalking-horse bid, the breakup fee and the amount outstanding on Hostess' $50 million prepetition revolver with GE Capital Corp. Competing bidders would also need to provide a 5% deposit by a proposed Feb. 25 bid deadline.

During the auction, bids would increase in $5 million increments.

Under the separate bidding procedures for the sale of its Beefsteak's IP, if Flowers Foods didn't win the auction, it would receive a $1.05 million breakup fee.

Hostess would also hold the auction for the Beefsteak IP on Feb. 28 and wants to schedule the sale hearing for March 5. The sale would also close by April 30.

Competing bidders would have to offer at least the amount of the stalking-horse bid, plus the breakup fee. They would also need to repay the prepetition revolver in full in cash and provide a 5% deposit. Court papers don't explain, however, how the repayment of the prepetition revolver would be split between the buyer of Wonder and other bread brands and the buyer of the Beefsteak IP.

During the auction, bids would increase in $1 million increments.

"This agreement is consistent with Flowers Foods' long-term growth objectives to reach significantly more of the U.S. population with its fresh breads, buns, and rolls," Flowers Foods chairman and CEO George E. Deese said in a statement Friday. "We believe these assets would enhance our ability, over time, to provide more U.S. consumers with quality baked foods at a good value through existing and new retail and foodservice customers."

Hostess, which traces its roots to the founding of Schulze Baking Co. in 1927, filed for Chapter 11 for a second time on Jan. 11, 2012. Hostess first filed for Chapter 11 as Interstate Bakeries Corp. on Sept. 22, 2004, in the U.S. Bankruptcy Court for the Western District of Missouri in Kansas City. The debtor exited from bankruptcy protection on Feb. 3, 2009.

Since its 2009 exit from Chapter 11, the debtor's financial performance hasn't kept pace with the projections set forth in its reorganization plan.

Hostess decided to liquidate on Nov. 16, one week after members of the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union began a strike at Hostess plants.

Corinne Ball, Heather Lennox, Lisa Laukitis, Steven Bennett, Todd S. Swatsler and Robert W. Hamilton of Jones Day are debtor counsel. The Jones Day team also includes John Kane and Bob Profusek.

FTI Consulting Inc. is the company's financial adviser. Perella Weinberg Partners LP is the debtor's investment banker.

Thomas Moers Mayer, Philip Bentley and P. Bradley O'Neill at Kramer Levin Naftalis & Frankel LLP represent the official committee of unsecured creditors. Blackstone Advisory Partners LP is financial adviser for the committee.

William Randolph Smith, Olivier N. Antoine, Mika Clark and Ty Carson at Crowell & Moring LLP are serving as antitrust regulatory counsel to Flowers Foods. Kilpatrick Townsend & Stockton LLP is Flowers Food's corporate counsel.

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Tags: Blackstone Advisory Partners LP | Butternut | Chapter 11 | Crowell & Moring LLP | FBC Georgia LLC | Flowers Foods Inc. | FTI Consulting Inc. | GE Capital Corp. | George E. Deese | Home Pride | Hostess Brands Inc. | Jones Day | Judge Robert D. Drain | Kilpatrick Townsend & Stockton LLP | Kramer Levin Naftalis & Frankel LLP | Merita | Nature's Pride | Perella Weinberg Partners LP | Tastykake | Wonder

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Jamie Mason

Senior Editor: Out of Court Restructuring



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