http://money.cnn.com/2012/11/16/news/companies/hostess-closing/
Hostess Brands closing for good
By Chris Isidore and James O'Toole @CNNMoney November 16, 2012: 11:53 AM ET
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NEW YORK (CNNMoney) -- Hostess Brands -- the maker of such iconic baked goods as Twinkies, Drake's Devil Dogs and Wonder Bread -- announced Friday that it is asking a federal bankruptcy court for permission to close its operations, blaming a strike by bakers protesting a new contract imposed on them.
The closing will result in Hostess' nearly 18,500 workers losing their jobs as the company shuts 33 bakeries and 565 distribution centers nationwide, as well as 570 outlet stores. The Bakery, Confectionery, Tobacco Workers and Grain Millers International Union represents around 5,000 Hostess employees.
"We deeply regret the necessity of today's decision, but we do not have the financial resources to weather an extended nationwide strike," said CEO Gregory Rayburn in a statement.
Hostess will move to sell its assets to the highest bidder. That could mean new life for some of its most popular products, which could be scooped up at auction and attached to products from other companies.
A letter that Hostess sent to its network of stores that carry its product said it expects "there will be great interest in our brands." But it said it could not give a time frame for when the sales would take place and its products would be available again.
But even if those brands are bought and restarted, the Hostess workers will not get their jobs back.
"The industry has overcapacity. We're overcapacity. Our rivals are overcapacity," said Rayburn in an interview on CNBC. Asked if the shutdown decision could be reversed if the Bakers' union agreed to immediately return to work, he responded, "Too late."
While approval of the bankruptcy court is needed before the company can start selling its assets in liquidation, the company said production at all of its bakeries has ceased effective Friday, and that stores will no longer receive products from Hostess Brands after the final round of deliveries of products that were made Thursday night.
But products that are already in stores can be sold, and the outlet stores will remain open for about a week to sell the products they already have.
Related: Cake Wreck -- From icon to bust
Hostess had annual sales of about $2.5 billion. The company said it had been making 500 million Twinkies and 127 million loaves of Wonder Bread annually before Friday's shutdown.
Its bread brands, including Wonder Bread, Nature's Pride and Butternut, make the company the No. 2 bread baker in the country, according to Symphony/IRI Group. Bimbo Bakeries, maker of the Arnold and Stroehmann brands, is the No. 1 bread baker.
The company had given a 5 p.m. ET Thursday deadline for the bakers to return to work or face a shutdown of the company. The unions at Hostess could not be reached immediately for comment on the decision.
Hostess filed for bankruptcy in January, its second trip to bankruptcy court since 2004. It previously emerged from restructuring in 2009 after a four-and-a-half year process.
Related: The history of labor battles at Hostess
The company is now controlled by a group of investment firms, including hedge funds Silver Point Capital and Monarch Alternative Capital.
In September, membership of one of its major unions, the International Brotherhood of Teamsters, voted narrowly to accept a new contract with reduced wages and benefits. The Bakers' union rejected the deal, however, prompting Hostess management to secure permission from a bankruptcy court to force a new concession contract on workers.
The Teamsters union, which represents 6,700 Hostess workers, issued a statement blaming mismanagement by Hostess executives for the company's problems. But it also was critical of the decision of Bakers' union, although it did not identify the union by name.
"Unfortunately, the company's operating and financial problems were so severe that it required steep concessions from a variety of stakeholders but not all stakeholders were willing to be constructive," said Ken Hall, the Teamsters' Secretary-Treasurer. "Teamster Hostess members, based on the facts and advice from respected restructuring advisors, understood what was at stake and voted to protect all jobs at Hostess."
Hostess Brands closing for good
By Chris Isidore and James O'Toole @CNNMoney November 16, 2012: 11:53 AM ET
63
Email Print
NEW YORK (CNNMoney) -- Hostess Brands -- the maker of such iconic baked goods as Twinkies, Drake's Devil Dogs and Wonder Bread -- announced Friday that it is asking a federal bankruptcy court for permission to close its operations, blaming a strike by bakers protesting a new contract imposed on them.
The closing will result in Hostess' nearly 18,500 workers losing their jobs as the company shuts 33 bakeries and 565 distribution centers nationwide, as well as 570 outlet stores. The Bakery, Confectionery, Tobacco Workers and Grain Millers International Union represents around 5,000 Hostess employees.
"We deeply regret the necessity of today's decision, but we do not have the financial resources to weather an extended nationwide strike," said CEO Gregory Rayburn in a statement.
Hostess will move to sell its assets to the highest bidder. That could mean new life for some of its most popular products, which could be scooped up at auction and attached to products from other companies.
A letter that Hostess sent to its network of stores that carry its product said it expects "there will be great interest in our brands." But it said it could not give a time frame for when the sales would take place and its products would be available again.
But even if those brands are bought and restarted, the Hostess workers will not get their jobs back.
"The industry has overcapacity. We're overcapacity. Our rivals are overcapacity," said Rayburn in an interview on CNBC. Asked if the shutdown decision could be reversed if the Bakers' union agreed to immediately return to work, he responded, "Too late."
While approval of the bankruptcy court is needed before the company can start selling its assets in liquidation, the company said production at all of its bakeries has ceased effective Friday, and that stores will no longer receive products from Hostess Brands after the final round of deliveries of products that were made Thursday night.
But products that are already in stores can be sold, and the outlet stores will remain open for about a week to sell the products they already have.
Related: Cake Wreck -- From icon to bust
Hostess had annual sales of about $2.5 billion. The company said it had been making 500 million Twinkies and 127 million loaves of Wonder Bread annually before Friday's shutdown.
Its bread brands, including Wonder Bread, Nature's Pride and Butternut, make the company the No. 2 bread baker in the country, according to Symphony/IRI Group. Bimbo Bakeries, maker of the Arnold and Stroehmann brands, is the No. 1 bread baker.
The company had given a 5 p.m. ET Thursday deadline for the bakers to return to work or face a shutdown of the company. The unions at Hostess could not be reached immediately for comment on the decision.
Hostess filed for bankruptcy in January, its second trip to bankruptcy court since 2004. It previously emerged from restructuring in 2009 after a four-and-a-half year process.
Related: The history of labor battles at Hostess
The company is now controlled by a group of investment firms, including hedge funds Silver Point Capital and Monarch Alternative Capital.
In September, membership of one of its major unions, the International Brotherhood of Teamsters, voted narrowly to accept a new contract with reduced wages and benefits. The Bakers' union rejected the deal, however, prompting Hostess management to secure permission from a bankruptcy court to force a new concession contract on workers.
The Teamsters union, which represents 6,700 Hostess workers, issued a statement blaming mismanagement by Hostess executives for the company's problems. But it also was critical of the decision of Bakers' union, although it did not identify the union by name.
"Unfortunately, the company's operating and financial problems were so severe that it required steep concessions from a variety of stakeholders but not all stakeholders were willing to be constructive," said Ken Hall, the Teamsters' Secretary-Treasurer. "Teamster Hostess members, based on the facts and advice from respected restructuring advisors, understood what was at stake and voted to protect all jobs at Hostess."
