Milling & Baking News - October 3, 2023 - 7

TUES | 10 03 2023
Editorial
Hostess saga truly the sweetest
comeback in the history of ever
W
hen Hostess Brands, Inc.
announced in 2012 it was liquidating
its assets after it was
unable to reach a labor agreement with
its unions, C. Dean Metropoulos & Co.
immediately expressed interest in acquiring
the company's snack cake assets.
" Our family would love to purchase these
iconic brands, " Daren Metropoulos,
a principal at Metropoulos & Co., told
Businessweek within days of the Hostess
announcement. " We are actively pursuing
this deal. " A few months later, the
transaction was completed, and in July
2013, Hostess snack cakes returned to
supermarket shelves following an eightmonth
hiatus. The company promoted the
rebirth as the " sweetest comeback in the
history of ever. "
Having largely liquidated their holdings
very profitably three years later,
Metropoulos & Co. no longer is the leading
shareholder of Hostess Brands. Still, the
announcement the J.M. Smucker Co. will
purchase Hostess for $5.6 billion underscores
the foresight of Metropoulos'
actions 10 years ago. For the commercial
baking industry, the Smucker-Hostess
acquisition is historic.
To begin with, the transaction is the
largest ever in the US bread and cake
category, and by a wide margin. By way
of comparison, recent prominent acquisitions
in the bread category have included
FGF Brands Inc. buying Weston Foods
Inc. for $1.2 billion; Grupo Bimbo acquiring
East Balt Bakeries for $650 million in
2017; and Flowers Foods, Inc. purchasing
Dave's Killer Bread in 2015 for $275 million.
Earlier major transactions included
Bimbo's purchase of Sara Lee Bakery in
2010 for $1 billion, Bimbo's purchase of
EDITORIAL STAFF
Executive Editor, Markets
Neil N. Sosland
Editor
L. Joshua Sosland
Managing Editor
Eric Schroeder
Senior Editor, Markets
Ron Sterk
Senior Editor
Jeff Gelski
Associate Editor
Zachary Sosland
bakingbusiness.com
Associate Editor, Markets
Matt Noltemeyer
Crystal Futrell
Digital Media Associate
Editor
Sean Dolan
Markets,
Senior Graphic Designer,
Purchasing Seminar
Coordinator
Christina Sullivan
Publisher
G. Michael Gude
Associate Publishers
David DePaul
Bruce Webster
Matt O'Shea
National Account Executive
Tom Huppe
Lily Alvarez
other major Weston brands in 2008 for
$2.4 billion; Sara Lee's 2001 acquisition
of Earthgrains for $1.9 billion; and Interstate
Bakeries' 1995 purchase of Continental
Baking Co. from Ralston Purina
for $550 million. The latter deal included
the snack cake business Smucker is
acquiring, 28 years later - for more than
$5 billion.
Swelling the value of the Hostess deal
The Metropoulos investment of $410 million in a
business nearly left for dead has blossomed into
a company with a market capitalization of $4.45
billion.
is a price multiple of 3.3 times sales and
17 times EBITDA. The last large US snack
cake transaction (excluding Hostess) was
at 1 times sales - the $175 million acquisition
of Tasty Baking Co. in 2011 by Flowers
Foods, Inc.
Comparing the fates over the past 10
years of Hostess with other large commercial
baking companies offers another startling
way to see the ultimate success the
Hostess snack cake business enjoyed. In
2013, the group led by Dean Metropoulos
paid $410 million for most of the Hostess
snack cake assets, including Hostess and
Dolly Madison branded products together
with five baking plants.
Fast forward 10 years, and Hostess'
market capitalization has, thanks to the
high valuation of Smucker's buyout offer,
grown to nearly match the only other publicly
traded baking company in the United
States. Bolstered by an infusion of $250
million to upgrade production facilities, a
major distribution conversion to a warehouse-delivery
model and heightened
PUBLISHING STAFF
Senior Director of Marketing
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Kathi D. Gilleland
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MILLING & BAKING NEWS 7
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Design Services Manager
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attention on marketing, promotion and
innovation, the Metropoulos investment
of $410 million in a business nearly left for
dead has blossomed into a company with
a market capitalization of $4.45 billion.
That compares with Flowers Foods at
$4.9 billion and Grupo Bimbo SAB de CV
at $21.5 billion. Flowers and Bimbo both
trade at valuations just beneath 1 times
sales. The heady Hostess valuation at 3.3
times sales more closely resembles Mondelez
International, Inc., and PepsiCo, Inc.,
which have touched 3 times sales in recent
years.
Smucker is acquiring Hostess at a time
of enthusiasm among consumer-packaged
foods companies about the growth
potential for the snack cake market. Dirk
Van de Put, chairman and chief executive
officer of Mondelez, last month said, " We
see baked snacks as a natural extension
of the biscuits market " and spoke at
length about its promise. Regardless of
how this category's future plays out, the
soon-to-be completed 10-year chapter
when the Hostess Brands snack cake
business soared as an independent company
truly stands as a success story for
the ages. MBN
Josh Sosland, Editor
We're eager to get your feedback.
editor@sosland.com
CORPORATE
Chairman and CEO
Charles S. Sosland
President
L. Joshua Sosland
Chief Financial and
Administrative Officer
Staci Greco
Chief Operating Officer
and Executive Editor
Meyer Sosland
http://www.bakingbusiness.com
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