Hostess Brands To Go Public After Purchase By Acquisition Company

Posted On: 7/6/2016

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TAGS: Hostess Brands LLC, Hostess sale, Hostess IPO, Gores Group, Apollo Global Management LLC, C. Dean Metropoulos, Hostess CupCakes, Twinkies, vending machine snacks

LOS ANGELES -- Hostess Brands LLC said an affiliate of private equity firm Gores Group will purchase the pastry firm in a $725 million deal and take it public.

Hostess, founded in the early 20th century, was picked up from bankruptcy in 2013 by private equity firm Apollo Global Management LLC and investor C. Dean Metropoulos for $410 million. | SEE STORY

In the latest development, Hostess will be introduced as a publicly listed company, with an anticipated initial enterprise value of $2.3 billion, or 10.4 times the its estimated 2016 adjusted EBITDA of some $220 million. As part the agreement, Gores Holdings Inc., set up by the Gores Group to make acquisitions and other deals, will pay $375 million in cash to Hostess shareholders.

Other investors, including Gores Group chief executive Alec Gores and Metropoulos, have committed $350 million through a private placement. Apollo and Metropoulos are expected to hold a combined stake of about 42% in Gores Holdings upon completion of the deal. Metropoulos will remain executive chairman of Hostess and William Toler will continue as its chief executive.

Hostess, which has filed for bankruptcy twice in its nearly century-long history, reported sales of about $650 million in the 12 months ended May 31. A year ago, the company had abandoned plans for a sale in favor of an initial public offering. The Hostess-Gore deal is expected to close in the third quarter of 2016.

The original company introduced Hostess CupCakes in 1919 and Twinkies in 1930. The successor Hostess Brands continues to produces those two famous snack cakes and other classic and new treats, including Ding Dongs, Ho Hos, Donettes and Fruit Pies. It maintains baking facilities in Emporia, KS, Indianapolis, IN, and Columbus, GA, and operates a direct-to-warehouse distribution system. Hostess products are also sold by vending machine operators.