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Hostess Brands - >>> Four things to know about Hostess before it goes public



By Caitlin Huston

PJuly 6, 2016



http://www.marketwatch.com/story/four-things-to-know-about-hostess-before-it-goes-public-2016-07-05?siteid=bigcharts&dist=bigcharts



Twinkies maker plans reverse-merger maneuver after acquisition

Twinkies are worth $2.3 billion.


That is the planned valuation of Hostess Brands LLC when it is taken public by acquisition company Gores Holdings Inc. To be fair, that valuation also includes the Ding Dongs and CupCakes brands.

Gores Holdings Inc. US:GRSH said Tuesday that it had entered an agreement to buy Hostess, which would take the company public at 10.4 times the value of Hostess’s 2016 adjusted earnings before interest, tax, depreciation and amortization. Once the transaction is complete, which is expected to be in the third quarter of 2016, Gores Holdings will be renamed Hostess Brands Inc.

Deutsche Bank Securities Inc. was the lead capital markets adviser, followed by Moelis & Company and Morgan Stanley.

Here are four things to know before Hostess goes public:

A structured deal

Hostess isn’t going public in the traditional sense. Instead, the company will be bought by Gores Holdings, an already public company, which will give $375 million in cash to the offering.

Alec Gores, chief executive of The Gores Group leads a group of investors that will also participate in the offering with $350 million in private placements, including large institutional names and C. Dean Metropoulous, current co-owner of Hostess. That money will be used to pay sellers of stock, transaction expenses and part of the company’s debt. If the money doesn’t cover the total payment to the sellers, the sellers will receive shares of Gores Holdings common stock.

Once the transaction is completed, Metropoulous and his family, as well as Apollo Management, the other owner of Hostess, will hold a 42% total stake in the company.

Dean Metropoulos will continue to be executive chairman and William Toler will continue as chief executive.

Out of Bankruptcy

Hostess filed for bankruptcy in 2012 and liquidated its assets, selling Wonder Bread to Flowers Foods Inc. FLO, +2.04% and the other brands to private-equity firms Apollo Global Management LC and Metropoulous & Co., according to The Wall Street Journal.

In 2015, the Journal reported that Hostess Brands was back on its feet and had expanded distribution of the snacks to movie theaters and Carl’s Jr. restaurants. Hostess had revenues of about $650 million for the 12 months ended May 31 and the private equity partners see this sale as the next step.

“Hostess possesses exciting continued organic top-line growth potential and is one of the highest Ebitda margin and cash generative food platforms in the U.S.,” Andy Jhawar, senior partner at Apollo, said in the news release.

Do people still eat Twinkies?

The 2011 bankruptcy was the second time the company had filed for bankruptcy. The company, known as Interstate Bakeries at the time, had previously filed in 2004. One of the reasons for the 2004 filing was a shift in consumer behaviors, with Americans preferring healthier foods, according to The Wall Street Journal.

Still, there always seems to be somewhat of a demand for Twinkies, as consumers always want something to snack on, and look for single serving packs of the treats.

A noble history

Hostess was founded in 1919, with a business centered on the Hostess CupCake. Then, in 1930, America was hit by the unprecedented introduction of the Twinkie, in “an event many say changed the snack cake world,” according to Hostess.

That world was rocked once more in 2012, when Hostess filed for bankruptcy and customers stocked up on Twinkies out of fear that the company would not be able to produce any more of the cream-filled treat, according to the Huffington Post and other outlets.

But fear not, Hostess also has Ding Dongs, Ho Hos, Donettes and Fruit Pies in its noble lineage

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