Commentary Magazine


Topic: Hostess

Irony: Leveraged Buyout Firm May Save Twinkies, Union Jobs

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.”

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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.

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