So Who's Picking Up the Twinkies?

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By now you've probably heard about the decision by Hostess Brands to liquidate its assets in the face of nationwide strikes. If you're like me then your day has been filled with Facebook memes, Twinkie jokes, and the occasional quote from Zombieland. What you might have missed, however, is the speculation about the future of Hostess' products; while a lot of people are talking about the "death" of the snack food brands, there is relatively little chance that the most well-known brands are going to simply cease to exist. Even if Hostess does go under, there's already talk of who might be involved in the bidding war for the almighty Twinkie.

Flowers Foods (NYSE: FLO) is one name that's been mentioned in several circles. It makes sense that Flowers would want to purchase any Hostess assets that it could; the two companies compete directly in both the bread and snack cake markets, with Flowers owning the Nature's Own and Bunny bread brands among others, as well as the Mrs. Freshley's, Blue Bird, and Tastykake brands in the snack aisle. Hostess' Wonder Bread line would expand Flowers' dominance in bread brands, while Twinkies, Ding Dongs, and Donettes would beef up their snack food offerings. Buying as much as they can from Hostess would be a smart move for Flowers because it would eliminate some strong competition and add several products to Flowers' lineup with instant name recognition.

Another potential contender for some of Hostess' assets is C. Dean Metropoulos & Co., a private equity firm that owns the Pabst Brewing Company. Metropoulos has already made their interest known, with Daren Metropoulos saying that they were "actively pursuing this deal." It wouldn't be the first time that Metropoulos has revived a brand that was struggling; in 1996 the company formed International Home Foods and purchased the Chef Boyardee, PAM cooking spray, and Bumble Bee seafood lines and sold IHF four years later for $2.6 billion. Similar purchases in 2004 saw the merger of Aurora Foods and Duncan Hines owner Pinnacle Foods, a combo that was sold in 2007 for another $2.2 billion. The Hostess brands would give Metropoulos plenty of notoriety to work with, helping the firm to revive the brand and make a tidy profit if and when it decides to sell them.

Kellogg (NYSE: K) has been mentioned in some discussions, and for good reason; Kellogg's has seen just how profitable high-profile acquisitions can be recently with its purchase of Pringles potato chips. Pringles is now the company's #2 brand, and after that success it's easy to imagine the company wanting to add some other well-known snack brands to its portfolio. Given how much of the Kellogg's portfolio is focused on cereals, breakfast bars and toaster pastries, adding some of the Hostess brands to sit alongside Pringles and Keebler-brand cookies in the snack aisles would further broaden the company's reach.

Mondelez International (NASDAQ: MDLZ) has also come up as a potential buyer of the Hostess brands. If you aren't familiar with the name it's the spun-off company that was formerly Kraft Foods' snack division. Like Flowers Foods, Mondelez was a major competitor of Hostess and would benefit both from the new product lines and the removal of competing products. It's been said that Mondelez' current focus on expanding into international markets might hinder its ability to be a major bidder for the Hostess brands, but given how well-known some of the brands are I find it hard to believe that the company won't at least make an attempt.

Of course, there may be a little time before we know anything of any substance about what will happen to the Hostess brands. The company has to get approval from the court to liquidate its assets, and when the brands do wind up on the auction block there could be companies and equity firms coming out of the woodwork for a piece of Hostess' pie. Some brands, such as Twinkies and Ding Dongs, will likely be greatly desired, while others such as Chocodiles might end up unsold or purchased as part of a group of brands and then shelved. Regardless of what happens, it's unlikely that we won't see new batches of Twinkies on the shelves again in the not-too-distant future.


Croaxleigh has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Motley Fool newsletter services recommend Flowers Foods. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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