By Martinne Geller
Feb 27 (Reuters) - Flowers Foods Inc is set to buy
Wonder Bread and some other brands owned by Hostess Brands Inc
for $360 million, a source familiar with the matter
said on Wednesday, giving the No. 2 U.S. baking company a bigger
slice of the fast-consolidating bread business.
Pending approval from a U.S. bankruptcy court judge, Wonder
Bread, along with Butternut, Home Pride, Merita and Nature's
Pride, will go to Flowers after no other bidder stepped up to
make a competing offer, the source said.
Shares of Flowers, which makes Nature's Own bread and
Tastykake snacks, were up 2 percent in late afternoon trade, as
the deal is expected to boost the company's margins and
earnings.
Wonder Bread, known for its soft, spongy texture and
polka-dot wrapper, is an iconic American brand that has been
around for decades.
Hostess, which is liquidating its business after 82 years,
was set to run an auction on Thursday for the brands, but there
will be no auction since there were no other bids, said the
source, who declined to be named as the process is private.
There will be an auction for the Beefsteak brand, for which
Flowers bid $30 million, since Hostess received a higher bid
from Mexico's Grupo Bimbo, the source said. Bimbo
bid $1 million more for the Beefsteak brand, though its $31.9
million bid includes a $900,000 breakup fee.
Hostess declined to comment. Flowers did not immediately
return a call seeking comment.
A Bimbo spokeswoman declined to speculate on how the auction
process may unfold, noting that the company has already said
there may be Hostess assets that might make strategic sense.
"We'll just have to see how that plays out," spokeswoman
Monica Breton Salazar said.
Flowers agreed in January to be the "stalking horse" bidder
for bread brands including Wonder Bread, which set a floor for
the bidding and was subject to a court-supervised auction.
Flowers, founded in 1919 in Thomasville, Georgia, has grown
over the years through a string of acquisitions. It was the
one-time owner of well-known names including Keebler Foods and
Mrs. Smith's pies.
SunTrust Robinson Humphrey analyst William Chappell expects
the Hostess deal to add at least 30 cents per share to Flowers'
earnings once the brands are integrated. He expects to hear more
about Flowers' estimates and strategy at a company-sponsored
analyst meeting in New York next month. He has a "buy" rating on
the stock.
MORE TO COME
Hostess expects to run two more auctions next month. One
would be for the Hostess snack cake brands, including Twinkies
and Dolly Madison, for which private equity firms Apollo Global
Management LLC and C. Dean Metropoulos & Co set the
bidding at $410 million.
Grupo Bimbo, the world's largest breadmaker with U.S.
products including Entenmann's cakes, Arnold bread and Thomas'
English Muffins, was also a candidate to bid for Hostess' snack
cake brands which include Twinkies, sources previously told
Reuters.
The other auction would be for its Drake's cake business and
additional bread brands. So far, McKee Foods, maker of Little
Debbie snack cakes, offered $27.5 million for Drake's, which
includes Ring Dings, Yodels and Devil Dogs.
United States Bakery Inc, also known as Franz Family Bakery,
agreed to pay $28.85 million for the Sweetheart, Eddy's,
Standish Farms and Grandma Emilie's bread brands.
Bimbo agreed to buy the North American Sara Lee bread
business in 2010 as the company sought to expand its reach in
the baked goods market. Selling fresh bread is often a difficult
business, as there are a lot of low-cost store branded players.
Hostess obtained permission late last year to wind down its
business after a strike by its bakers union crippled the
company. The sale of its brands and assets is being run by
Joshua Scherer of Perella Weinberg Partners.
Flowers shares ended 2.3 percent higher at $28.32 on the
New York Stock Exchange on Wednesday. Grupo Bimbo shares were up
2.7 percent at 33.87 pesos in trading in Mexico City.
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