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VOL. 37 | NO. 4 | Friday, January 25, 2013
Hostess picks Little Debbie maker for Drake's
NEW YORK (AP) — Hostess has picked the maker of Little Debbie as the lead bidder to buy its Drake's cakes.
According to a filing in U.S. bankruptcy court, McKee Foods has offered $27.5 million in cash for the cake brands, which include Devil Dogs, Funny Bones and Yodels. The fate of Twinkies and other Hostess cakes are still being negotiated with other bidders.
The "stalking horse" bid by McKee would set the floor for an auction process that lets competitors make better offers. A judge would have to approve the final sale.
McKee Foods, based in Collegedale, Tenn., makes a variety of snack cakes under the Little Debbie banner that compete with Hostess cakes at a lower price. For example, its Cloud Cakes resemble Twinkies and its Devil Cremes resemble Devil Dogs.
McKee generates about $1.1 billion in sales a year, with its Little Debbie cake division accounting for $800 million of that, according to the company. In recent years, McKee has seen its sales remain flat or fall as eating habits have changed.
Hostess Brands Inc., based in Irving, Texas, announced in November that it was shutting down its business and selling its breads and snack cakes. The company's demise came after years of management turmoil and turnover, with workers saying the company failed to invest 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 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.