News Column

McKee Foods Offers $27.5 Million for Drake's Cakes

Jan. 29, 2013

Mike Pare, Chattanooga Times Free Press, Tenn.

McKee Foods' chief said Monday that its $27.5 million bid for Drake's snack cakes is a chance to complement his company's product line.

Mike McKee, the Collegedale company's chief executive, said Hostess Brand's Drake's snacks has its roots in a family baking business, much like McKee Foods and its Little Debbie brand.

"We believe that Drake's will have a strong future within our family of brands," McKee said in a statement Monday.

Mike Gloekler, corporate communications manager for McKee, said the acquisition would be one of the biggest ever for the company if it goes through.

The so-called "stalking horse" bid by McKee set the floor for an auction process that lets competitors make better offers. A judge would have to approve the final sale.

According to a filing in U.S. bankruptcy court Monday, McKee offered $27.5 million in cash for the cake brands and certain equipment.

Hostess selected the McKee Foods bid after Perella Weinberg Partners, Hostess' financial adviser, conducted a bidding process that involved contacting 169 potentially interested parties, 88 of which signed confidentiality agreements, according to McKee Foods.

Gloekler has put McKee's annual sales at about $1.2 billion. McKee employs about 2,600 people in Collegedale and more than 5,000 workers nationwide.

Texas-based Hostess' annual sales are estimated at about $2.8 billion, according to Snack Food & Wholesale Bakery magazine.

Hostess Brands Inc., maker of Twinkies and Wonder Bread, announced last November that it intended to wind down operations and put about 18,000 people out of work. A Hostess distribution facility in Ringgold, Ga., employed about 25 employees.

The Irving, Texas-based company's demise came after years of management turmoil and turnover, with workers saying the company failed to invest in its brands. Hostess filed for its second Chapter 11 bankruptcy in less than a decade this January, citing costs associated with its unionized workforce.

Earlier this month, Hostess picked Georgia-based Flowers Foods, which makes Tastykake and Nature's Own and Bunny bread, as the lead bidder for six of its major bread brands, including Wonder.

The fate of Twinkies and other Hostess cakes still is being negotiated with other bidders.

The Associated Press contributed to this story.



Source: (c)2013 Chattanooga Times/Free Press (Chattanooga, Tenn.) Distributed by MCT Information Services


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