Fortunately, none of these famous snacks are going away, feverish news reports of Twinkie hoarding and e-Bay price gouging notwithstanding. Hostess Brands in its current corporate form is headed for liquidation, joining Pan-Am, Polaroid and many others in the graveyard of iconic companies whose demise would have at one point in their history seemed unfathomable. Whether blame lays more properly with its unions or management remains unclear. But its name and most of its individual brands will continue on. The intriguing question at this point is in what form?
Specifically, will Hostess’s infrastructure assets, including its employees, remain attached to its recipes, trademarks and logos? Will its distribution networks stay intact? Is the enterprise as a whole worth more than the individual pieces?
Sometime in the next several days, Hostess’s bankruptcy counsel will file a motion for the approval of bidding and auction procedures to begin a distressed m&a process that will look to answer that precise question. It is possible that Hostess will already have a lead bidder to serve as the “stalking horse” and provide a baseline against which to compare other bids, but the more likely scenario is that the company and its investment bankers will start the process without one, and look to line up prior to the auction either a single stalking horse for the entire enterprise, or several stalking horse bids for individual brands and related segments of the business.
The auction itself promises to be one for the ages, as bids for the entire enterprise and for the separate pieces will constantly be weighed against each other. Distressed m&a auctions in large and complex chapter 11 cases have been known to extend on well past twenty-four hours. Fortunately, it can readily be expected that there will be a large supply of carbohydrates on hand to fuel the participants and their professionals.