Sector News

New Hostess owners looking to flip Twinkie-maker for $2 billion

April 24, 2015
Consumer Packaged Goods
Twinkie’s $2 billion price tag is too rich for some junk food lovers.
 
Just two years after buying the Hostess snack cake business for $410 million, the relatively new owners are looking to flip the bakery outfit for a high multiple, The Post has learned.
 
The $2 billion figure is roughly 10 times the company’s annual $200 million of Ebitda (earnings before interest, taxes, depreciation and amortization), according to sources.
 
At that price, the owners — Leon Black’s Apollo Global Management and billionaire C. Dean Metropoulos — would reap $1.5 billion from their $200 million equity investment in the business, after subtracting $500 million of debt.
 
That’s more than one potential suitor told The Post it’s willing to pay for Hostess.
 
Bankers for Apollo and Metropoulos have just started to shop the Kansas City, Mo., business to a handful of rivals and other buyout shops.
Hostess competitors include Grupo Bimbo, Flowers Foods, Mondelez, Hershey, Campbell and Snyder’s-Lance.
 
“It is just starting right now,” said one source close to the sales process.
 
The fact that none of Hostess’ rivals tried to preempt an auction is an indication that the owners will have a hard time getting the $2 billion asking price, the source said.
 
First-round bids are expected in the second half of May.
 
The Hostess pitch to potential buyers: The maker of Twinkie, Ding Dongs and Ho Hos, among other iconic snack cakes, has room to grow.
The Hostess snack business generates $650 million in sales. The company said a new owner could boost that figure to $1 billion — roughly where it was before bankrupt Hostess liquidated in 2012.
 
After an acrimonious fight with its unionized workers, the company is back up and running under a much leaner structure.
 
The new Hostess has roughly 1,000 employees and five factories. It relies on contract drivers to deliver products to stores less frequently than the old company did. (The new owners also retooled the Twinkie recipe so that the cakes could sit longer in the warehouse without going stale.)
By comparison, the old company had 9,000 employees, 14 plants and 5,000 dedicated drivers who dropped off fresh product more than once a week.
 
Apollo declined comment.
 
By Josh Kosman
 

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