Twinkies maker Hostess Brands explores sale amid takeover interest -sources

Hostess Brands

25/08/2023 20:37

(Adds background on Hostess, share reaction)
    By Anirban Sen and Abigail Summerville
       NEW YORK, Aug 25 (Reuters) - Hostess Brands Inc
 TWNK.O , the maker of Twinkies snack cakes, is exploring a sale
after fielding takeover interest from major snack food makers,
people familiar with the matter said on Friday.
    Hostess became an acquisition target after it raised prices
on some of its products to boost revenue, fueling investor
concerns over its prospects. Prior to the news of the company
exploring a sale, its shares were down 1% year-to-date, versus a
29% rise in the Nasdaq Composite Index.
    General Mills Inc  GIS.N , Mondelez International Inc
 MDLZ.O , PepsiCo Inc  PEP.O  and Hershey Co  HSY.N  are among
the companies that have shown an interest in acquiring Hostess,
the sources said.
    Hostess has hired investment bank Morgan Stanley  MS.N  for
advice on handling the deal negotiations, the sources said. No
agreement is certain and Hostess may decide against any deal,
the sources added.
    The sources asked not to be identified because the matter is
confidential. Hostess and Hershey declined to comment, while
General Mills, Mondelez, PepsiCo and Morgan Stanley did not
immediately respond to requests for comment.
    Hostess shares rose 26% on the news to $27.89 in Friday
afternoon trading in New York, giving the company a market value
of close to $4 billion. Hostess also had debt net of cash  of
about $900 million as of the end of June.
    Based in Lenexa, Kansas, Hostess was founded in 1930 and is
behind several iconic household brands, including Ho-Hos, Ding
Dongs, Zingers, and Voortman cookies and wafers.
    The company filed for bankruptcy twice, in 2004 and 2012,
due to a combination of private equity owners saddling it with
debt and failing to come up with new snacks that appealed to
consumers.
        Entrepreneur Dean Metropoulos and private equity firm
Apollo Global Management Inc  APO.N  returned Hostess to the
stock market in 2016 through a deal with a special purpose
acquisition company backed by the private equity firm founded by
Alec Gores.
    By the end of 2020, Hostess had revamped its portfolio and
was generating revenue of over $1 billion, an important landmark
in its turnaround efforts. It has managed to keep its revenue
growing, sometimes by raising prices as sales volumes weakened.
        Hostess reported 
    net revenue
     of $352.4 million in the second quarter, up 3.5%
year-on-year. Gross profit increased 11.8% to $126.0 million.
  

 (Reporting by Anirban Sen and Abigail Summerville in New York;
Editing by Chris Reese and Marguerita Choy)
 ((Anirban.Sen@thomsonreuters.com; Twitter: @asenjourno; Reuters
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