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Hostess, union fail to reach deal in mediation

Reuters – 6 mins ago

Reuters/Reuters - A box of Hostess Twinkies is seen on the shelves at a Wonder Bread Hostess Bakery Outlet in Glendale, California, in this November 16, 2012, file photo. REUTERS/Bret Hartman/Files


(Reuters) - Hostess Brands Inc, the bankrupt maker of Twinkies, said on Tuesday that it failed to reach a deal in mediation with the Bakery, Confectionary, Tobacco and Grain Millers Union.

The company said it will have no further comment until a hearing scheduled for Wednesday before the U.S. Bankruptcy Court for the Southern District of New York.

A representative of the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union (BCTGM) did not immediately respond to a request for comment.

The ailing company, which also makes Wonder Bread and Drake's cakes, sought permission from bankruptcy court on Monday to liquidate its business, claiming that its operations were crippled by the bakers' strike and that winding down was the best way to preserve its dwindling cash.

But Bankruptcy Judge Robert Drain of the Southern District of New York urged the sides to go into a private mediation, prompted by a desire to protect the more than 18,000 jobs at stake.

The 82-year-old Hostess runs 33 bakeries, 553 distribution centers, about 5,500 delivery routes and 527 bakery outlet stores throughout the United States. Bakery operations ceased last week, though product deliveries to stores continued in order to sell already-made products.

The company has blamed union wages and pension costs for contributing to its unprofitably. Hostess Chief Executive Gregory Rayburn has also said the company's labor contracts have deterred would-be bidders for the company and its assets.

Aside from its unionized workforce, analysts, bankers and restructuring experts have said that a fleet of inefficient and out-of-date factories has also eaten up costs. They have said the brand names were likely to be more valuable once they were separated from the factories and sold to non-union competitors.

Bankers have said rivals including Flowers Foods and Mexico's Grupo Bimbo were very likely to be interested in parts, but not all of, the brands. Neither company could be reached for comment. Private equity firms are also interested.

Sun Capital Partners is interested in bidding for all of Hostess, according to a source familiar with Sun's plans, and Metropolous & Co is also interested, according to Daren Metropolous, a principal at the firm.

Officials at Sun did not respond to requests for comment.

http://news.yahoo.com/hostess-union-fail-reach-deal-mediation-002101478--finance.html

November 21, 2012, 4:08 PM

Court gives Twinkies maker go-ahead to liquidate


Jim.henderson/Wikipedia


NEW YORK Hostess Brands, the maker of Twinkies Ding Dongs and other snacks, has received approval from a bankruptcy court judge to wind down its business and sell all of its assets.

The ruling came Wednesday after Hostess failed in last-ditch negotiations to end a strike by its second-largest union.

Hostess blamed the company's collapse on striking employees belonging to the Bakery, Confectionary, Tobacco Workers and Grain Millers International Union.
"Hostess Brands is winding down the company after a nationwide strike initiated by the BCTGM that commenced on November 9 crippled its operations at a time when the company lacked the financial resources to survive a significant labor action," the food giant said in statement.

The bakers union denies responsibility for sinking Hostess. It attributes the company's failure to management errors, claiming in a statement earlier this month that Hostess' "six management teams over the last eight years were unable to make it a profitable, successful business enterprise."

After the court-ordered mediation talks ended unsuccessfully on Tuesday, the union called the company's closing a "tragic outcome."


Hostess now has the green light to terminate the jobs of its 18,000 workers and sell off its brands. CEO Gregory Rayburn said the company will send out termination notices to its employees on Wednesday.

"Those employees now need to look for work," he said.

Hostess said it intends to keep roughly 3,200 employees on the payroll to help with the first phase in the company's liquidation. It expects to eliminate 94 percent of its workforce over the next four months and to complete the wind-down in a year.
In court Wednesday, Hostess said it needed to begin the liquidation process quickly to take advantage of outside interest in its brands, which a banker said could fetch up to $2.4 billion. That's about how much they generate in annual sales. Twinkies sales alone have brought in roughly $68 million so far this year.
The banker, Joshua Scherer of Perella Weinberg Partners, told the court that interest in Hostess' brands has come from companies ranging from regional bakers to major national retailers that have long sold Hostess products.

"This is a once-in-a-lifetime opportunity to get iconic brands separate from their legacy operators," Scherer said during the bankruptcy-court hearing in White Plains, N.Y.

Hostess, based in Irving, Texas, has been spending about $1 million a day in payroll without any income since it halted operations last week.
The company shut down its three dozen plants late last week after it said the strike by the bakery union hurt its ability to maintain normal production.

Management had said Hostess was already operating on razor-thin margins and that the strike was the final blow. The union pointed to the steep raises executives were given last year, as the company was spiraling down toward bankruptcy.

In announcing the court's decision, Hostess reiterated that its "inflated cost structure" put the company at a competitive disadvantage. It said most of those costs stemmed from collective bargaining agreements covering 15,000 of its employees.

Despite its closure, Twinkies and other of the company's products could still return to store shelves. The company has said several potential buyers have expressed interest in its brands.

http://www.cbsnews.com/8301-505143_162-57553317/court-gives-twinkies-maker-go-ahead-to-liquidate/