Hostess gets OK to begin winding down business
A bankruptcy court judge on Wednesday approved a request by Hostess Brands Inc to begin winding down its operations.
The ruling came on Wednesday after the maker of Twinkies, Ding Dongs and Wonder Bread failed in last-ditch negotiations to end a strike by its second-largest union.
Hostess now has the green light to terminate the jobs of its 18,000 workers without risking legal action, and to sell off its brands.
In court on Wednesday Hostess said it needed to begin the liquidation process quickly to take advantage of outside interest in its brands, which a banker said could fetch up to $2.4 billion. That's about how much Hostess generates in annual sales.
The banker, Joshua Scherer of Perella Weinberg Partners, told the court that interest in Hostess' brands has come from companies ranging from regional bakers to major national retailers that have long sold Hostess products.
"This is a once-in-a-lifetime opportunity to get iconic brands separate from their legacy operators," Scherer said during the bankruptcy-court hearing in White Plains, NY.
Hostess, based in Irving, Texas, also wanted to quickly shutter its business, because it has been spending about $1 million a day in payroll without any income since it halted operations last week.
CEO Gregory Rayburn said the company will send out termination notices to its employees on Wednesday.
"Those employees now need to look for work," he said.
The snack maker's demise was years in the making. Management missteps, rising labour costs and changing tastes culminated in a crippling strike by The Bakery, Confectionery, Tobacco Workers and Grain Millers International Union.
Hostess shut down its three dozen plants late last week after it said the strike by the bakery union hurt its ability to maintain normal production.
Management had said Hostess was already operating on razor-thin margins and that the strike was the final blow. The union meanwhile pointed to the steep raises executives were given last year, as the company was spiralling down towards bankruptcy.
"This is a very hostile situation and in some respects rightfully so," Rayburn said.