Exclusive: Twinkies maker Hostess Brands explores sale amid takeover interest, sources say

NEW YORK, Aug 25 (Reuters) – Hostess Brands Inc (TWNK.O), the maker of Twinkies snack cakes, is exploring a sale after fielding takeover interest from major snack food makers, people familiar with the matter said on Friday.

Hostess became an acquisition target after it raised prices on some of its products to boost revenue, fueling investor concerns over its prospects. Prior to the news of the company exploring a sale, its shares were down 1% year-to-date, versus a 29% rise in the Nasdaq Composite Index.

General Mills Inc (GIS.N), Mondelez International Inc (MDLZ.O), PepsiCo Inc (PEP.O) and Hershey Co (HSY.N) are among the companies that have shown an interest in acquiring Hostess, the sources said.

Hostess has hired investment bank Morgan Stanley (MS.N) for advice on handling the deal negotiations, the sources said. No agreement is certain and Hostess may decide against any deal, the sources added.

The sources asked not to be identified because the matter is confidential. Hostess and Hershey declined to comment, while General Mills, Mondelez, PepsiCo and Morgan Stanley did not immediately respond to requests for comment.

Hostess shares rose 26% on the news to $27.89 in Friday afternoon trading in New York, giving the company a market value of close to $4 billion. Hostess also had debt net of cash of about $900 million as of the end of June.

Based in Lenexa, Kansas, Hostess was founded in 1930 and is behind several iconic household brands, including Ho-Hos, Ding Dongs, Zingers, and Voortman cookies and wafers.

The company filed for bankruptcy twice, in 2004 and 2012, due to a combination of private equity owners saddling it with debt and failing to come up with new snacks that appealed to consumers.

Entrepreneur Dean Metropoulos and private equity firm Apollo Global Management Inc (APO.N) returned Hostess to the stock market in 2016 through a deal with a special purpose acquisition company backed by the private equity firm founded by Alec Gores.

By the end of 2020, Hostess had revamped its portfolio and was generating revenue of over $1 billion, an important landmark in its turnaround efforts. It has managed to keep its revenue growing, sometimes by raising prices as sales volumes weakened.

Hostess reported net revenue of $352.4 million in the second quarter, up 3.5% year-on-year. Gross profit increased 11.8% to $126.0 million.

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Anirban Sen is the Editor in Charge for U.S. M&A at Reuters in New York, where he leads the coverage of the biggest deals. After starting with Reuters in Bangalore in 2009, Anirban left in 2013 to work as a technology deals reporter in several leading business news outlets in India, including The Economic Times and Mint. Anirban rejoined Reuters in 2019 as Editor in Charge, Finance to lead a team of reporters, covering everything from investment banking to venture capital. Anirban holds a history degree from Jadavpur University and a post-graduate diploma in journalism from the Indian Institute of Journalism & New Media.
Contact:+1 (646) 705 9409

Abigail is on the M&A team and writes about consumer and retail deals. She joined Reuters in 2022 from Debtwire where she covered leveraged finance and the primary debt market for three years. Previously, her work has appeared in the Wall Street Journal, CNBC and the Boston Business Journal. She majored in business journalism at Washington and Lee University. Contact: 332-261-5948