- Hostess announced a major shift in ownership and organization Tuesday. Investment firms Metropoulos & Co. and Apollo Global Management LLC, which purchased the Hostess snack cake brands out of liquidation in 2013, are selling a majority stake in the company to Gores Holdings Inc., a publicly traded special-purpose acquisition company sponsored by Gores Group LLC.
- Hostess' value stands at about $2.3 billion, and the deal is expected to close in the third quarter of 2016, pending approval from regulators and Gores Holdings' stockholders.
- This deal means Gores will be able to make Hostess a publicly-traded company without Hostess having to undergo an IPO.
Gores is putting up $375 million it raised in its own IPO, while the company's Group chairman and CEO Alec Gores, current Hostess owner Dean Metropoulos, and other investors have committed another $350 million to the deal. Metropoulos, his family, and Apollo will own about a 42% combined stake in Gores Holdings, which will take the name Hostess Brands, Inc. upon the transaction's closing.
"Hostess presents a unique opportunity to invest in an iconic brand with strong fundamentals that is poised for continued growth," Alec Gores said in a statement.
Metropoulos and Apollo initially invested about $185 million in cash and stand to earn more than 10 times their investment on this deal, according to a Wall Street Journal report. Dean Metropoulos will serve as chairman of Hostess Brands, and William Toler will continue in his role as Hostess' CEO.
Hostess' journey from bankruptcy to new ownership to going public demonstrates how powerful brand recognition and fiscal discipline can be when it comes to turning around an ailing company. Decades of unwieldy acquisitive growth gave way to an overly complex production and delivery system, and Hostess declared bankruptcy twice, in 2004 and 2012. But the company has been reborn under the guidance of these two investment firms with many of its iconic brands intact.
While Hostess' portfolio has slimmed down in the interim, the company is now poised for new growth and expansion. This has included the addition of bread and bun lines under its own brand name last year and its acquisition of in-store bakery company Superior Cake Products, maker of the Superior on Main brand of sweet goods, last month.
Hostess stands on the opposite side of the health and wellness trends that have governed much of the activity in food and beverage in the past few years. But the company's executives have emphasized its continued focus on indulgence, even when making changes such as releasing whole grain muffins (in flavors like chocolate chip and birthday cake).