The New Hostess Company Resumes Operations

April 26, 2013
The Metropolous-Apollo-controlled company plans to reopen four plants and hire workers, but not union labor.

Hostess Brands Inc. is gone. Welcome Hostess Brands LLC.

A leaner, hopefully more efficient and apparently non-union Hostess is gearing up to resume production of Twinkies, HoHos and Ding Dongs and other goodies by mid-summer.

Metropoulos & Co. and Apollo Global Management LLC, the two investment firms that bought the largest chunk of assets of the former Hostess Brands Inc., have formed Hostess Brands LLC.

They announced plans to reopen in the next month or so four of the five bakeries they bought in bankruptcy court. However, those bakeries will not have unions, including the one whose nationwide strike sparked the 86-year-old company's decision to shut down in November.

Chief Executive C. Dean Metropoulos told the Wall Street Journal the new company will pump $60 million in capital investments into the plants between now and September and aims to hire at least 1,500 workers. "We do not expect to be involved in the union going forward," Metropoulos was quoted in the Journal.

The former Hostess Brands Inc. employed 19,000 workers, 15,000 of whom were represented by unions.

The Metropolous and Apollo funds bought five Hostess plants as well as iconic brands and other assets, for $410 million in March. They are restarting plants in Columbus, Ga.; Indianapolis; Schiller Park, Ill.; and Emporia, Kan. Uncertain is the fate of the fifth plant in Los Angeles.

Previously, the Hostess products bought in this deal were made at 11 plants, but Metropoulos told the Journal those plants were running at less than 50 percent capacity. The reopened plants will run at 85-90 percent, making the business "as efficient as possible," he was quoted as saying. The new company expects total capacity to be back to where it was before Hostess's shutdown by September.

Some of the reopenings apparently followed financial incentives from local economic development organizations. For instance, we saw a news release from the Georgia Dept. of Economic Development announcing the Columbus, Ga., restart following discussions between the state and the new owners. The Columbus plant initially will add 200 jobs and plans to create more than 300 jobs “within the next several years,” while the company invests more than $20 million there.

Hostess Brands Inc. filed for bankruptcy protection in January 2012 – the second time in eight years – and was renegotiating contracts and imposing new labor terms on its several unions. But its second-largest union, the Bakery, Confectionery, Tobacco Workers & Grain Millers International Union, refused to negotiate and launched a nationwide strike, which forced the company to shut down and liquidate.

In bankruptcy court-approved asset sales in March, Flowers Foods Inc. got the majority of the bread businesses; United States Bakery and Grupo Bimbo got smaller pieces of that business; and McKee Foods bought the Drakes snack cake business. Some of those purchases included plants and distribution centers; some were just for brands.

The Journal also reported the new Hostess plans to use third-party drivers and an outside sales organization and will deliver to supermarket warehouses instead of individual locations.

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