Private equity firm Sun Capital Partners is interested in buying bankrupt Twinkies manufacturer Hostess and reopening negotiations with the labor unions, CNN reports:
The proposal would be to operate Hostess as a going concern, including reopening the shuttered factories and continuing union representation of Hostess workers.
Sun Capital privately expressed interest in acquiring Hostess earlier this year, but the bakery’s creditors chose for an alternate reorganization plan that ultimately failed. Following Friday’s liquidation, Sun reengaged by contacting Hostess advisor Perella Weinberg Partners. It also plans to contact the relevant labor unions.
“I think that we could offer a slightly better, more labor-friendly deal than what was on the table last week,” says Sun co-CEO Marc Leder, in an interview with Fortune. “We also think that one point the unions have made is that there hasn’t been a great amount of reinvestment in the business. We’ve found that investing new capital into companies like this can be very positive for brand, people and profitability… We would look to invest in newer, more modern, manufacturing assets that would enable the company to become more productive and to innovate.”
Hostess entered its current bankruptcy under another private equity firm, Ripplewood Holdings, which recently warned labor unions that workers would have to accept certain cuts to keep the doors open. The unions assumed this was a bluff, refused the deal, and the company folded. Now the left is blaming the closure on the private equity firm’s unsuccessful business plan (an argument which may have some merit, but completely ignores the union’s rejection of any compromise).
The national labor movement, clearly worried about the impact this will have on its public image, has been trying to shift blame to the public equity industry in general. “What’s happening with Hostess Brands is a microcosm of what’s wrong with America, as Bain-style Wall Street vultures make themselves rich by making America poor,” said AFL-CIO President Richard Trumka on Friday.
Funny that a leveraged buyout firm like Sun Capital Partners may be one of the few options left to save Hostess and its unionized workers.
Doesn't Sun Valley Capitol have a fiduciary duty to its investors? Aren't the trademarks themselves the most valuable property that Hostess has? Why aren't they being sold off as assets by the bankrupcy court to satisfy the creditors? n nThis is what would happen if it was, say, "Joe's Hardware Store" and I once bought a ladder at auction from a bankrupt hardware store. Its what "liquidation" means and what is supposed to happen. n nWhat I believe we are seeing here is what we saw with "Government Motors" — the bankruptcy laws being re-written on an ex-post-facto basis so as to benefit a union. That's all fine and good, except what is that going to do to the private capitol markets when the rules go out the window? What's next, anyone who is "upside down" in a mortgage doesn't have to pay it? n
I was hoping for a takeover by the Federal government, nationalization and ObamaTwinkees. Ed Schultz could be their Political Affairs of the Workers Officer.
Doesn't this put the Obama Admin into a bind? n nOn the one hand, Twinkies really aren't good for you. Forget hypoglycemia and the "Twinkie Defense" — hypoglycemia (low blood sugar) occurs because the dramatic spike in sugar in your blood causes your body to dump insulin to deal with it, and then when the spike is gone, you don't have enough sugar in your blood to run your brain properly — think running a gasoline engine on way too lean a mixture — and hypoglycemia will mess you up psychologically worse than a lot of mental illnesses — but beyond that, the only thing with more chemicals and less natural ingredients were "Screaming Yellow Zonkers" that got pulled off the market in the 1970's, about the same time that McDonalds had to pull its first version of St Patrick's Day Shamrock Shakes when children's urine started turning bright green, much to the concern of their parents…. n nSo forget the school lunch issues, if Michelle wants to make an issue of unhealthy eating habits, well Twinkies are a good place to start. Not just from the sugar, but all of the additives and everything else, which may or may not cause children to be hyperactive but probably aren't good for them. n nOn the other hand, these are union guys. What's Obama to do? n nOn a more serious note, Ms. Goodman does have a very valid point — it is the ultimate irony if venture capitalists were to save the union jobs. And that is the only way they will be saved….
I await the day when pundits finally learn the difference between private equity firms. nSun Capital appears to be one of those that buys and holds – the path that worked rather well for Warren Buffet. nPossible that a lot of private equity firms saw what happened with KKR's too-high-price for RJR Nabisco in 1987, and complete disdain for any of us so unfortunate to work there. n nSun's Marc Leder is quoted: "…We would look to invest in newer, more modern, manufacturing assets that would enable the company to become more productive and to innovate.” n nROFL. What that means in the corporate baking business is not what anyone here understands. Maybe turn the Hostess bakery network into contract manufacturers. n nInnovation in bakery products with a six month shelf life is really difficult. nI still have bad memories of Wonder bread, from 1975.
As I understand it, the unions are in a stronger bargaining position if someone (eg Sun Capitol) buys Hostess than if Hostess ceases to exist and its assets are sold off as the assets of a company that has totally ceased to exist. n nYes, bankruptcy enables Hostess to nullify contracts, including those with its unions, but does not preclude the unions from striking its baking/distribution facilities and does not nullify certain NLRB "rights" that the union has. Now if Hostess were to be "liquidated", then the trademark properties are sold independent of the facilities that make them, and the factories (etc) sold as separate assets, then the union is in a far different situation, with a contract at a facility that they have some rights for, but which no longer is producing the product. n