WSJournal. Flowers Foods Sets Wonder Bread Bid

Flowers Foods Inc. FLO -0.20% is set to kick off bidding for most of Hostess Brands Inc.'s bread business, offering a total of up to $390 million for brands and other assets including Wonder Bread and Nature's Pride.

Flowers, the Thomasville, Ga.-based maker of Tastykakes and Nature's Own breads, is offering up to $360 million in cash for one pool of assets, which includes five major Hostess bread brands, 20 plants and 38 depots. In addition, the baking company is offering $30 million for Hostess's Beefsteak rye brand.

As the proposed stalking horse, or lead bidder, Flowers will set a floor price for the assets, which other would-be buyers could challenge at auction. If Flowers is bested during the contests, it will receive breakup fees of 3.5%—for example, $1.05 million if it loses out on Beefsteak.

Hostess still needs a judge's approval to move forward with the bankruptcy auction process.

The bakery company, which shut down operations in November following a crippling strike, is aiming to sell off all of its assets during a sale process that is expected to take months to wrap up. Its representatives have indicated they've already received substantial interest in all of Hostess's 30 or so brands, which include the iconic Twinkie, as well as a majority of its 36 plants, which include a kosher baking facility in New Jersey.

It looks as if the bread business will be the first asset pool to hit the auction block.

A person with knowledge of the matter said the company will seek court approval for the rules it wants to govern the bread auctions at a hearing Jan. 25, with bidding to probably follow in February. The bigger pool of assets being eyed by Flowers includes the Merita, Butternut and Home Pride brands, in addition to the classic Wonder Bread and healthy offering Nature's Pride. Hostess is still negotiating to find a buyer for a half-dozen of its smaller bread brands, according to this person.

The company's sweeter side has been attracting attention too. Private-equity firms Apollo Global Management LLC APO -0.26% and C. Dean Metropoulos & Co. are in discussions about teaming up on a possible bid for Hostess's cakes business. The discussions don't necessarily mean Apollo and Metropoulos, the owner of the Pabst Blue Ribbon beer brand, will end up bidding on the businesses. But the talks show the wide interest in the brands and their appeal to consumers.

The company's professionals have said they expect to name about four to six stalking-horse bidders in total, whose separate bids should ultimately mean that all of Hostess's assets find new homes—though whether they survive is another question. Hostess has brought on Hilco Industrial LLC to help liquidate assets that aren't grabbed in the going-concern portion of the sale process.

Hostess, based in Irving, Texas, sought Chapter 11 protection exactly one year ago Friday, saying it needed to cut labor costs in order to survive. The filing marked the company's second such descent into bankruptcy in recent years. This time around, Hostess dueled with its unions for months and ultimately won approval to implement a fresh labor deal, only to ultimately see its operations debilitated by a nationwide work stoppage orchestrated by the company's second-largest union in November. Hostess, which once employed 18,500, currently has about 410 employees helping with the wind-down.

Flowers, which started out as a bakery owned by the Flowers brothers in 1919, is the country's second-largest bakery by sales. Over the years, Flowers has acquired numerous other makers of bread, rolls and snack cakes and makes products like Tastykake Krimpets and Nature's Own whole wheat bread. But its presence is still largely concentrated in the Southern U.S., making Hostess, with its nationwide distribution, an attractive target.