Hostess Brands LLC on Tuesday said it reached an agreement to be taken public, a sweeter chapter in the snack-cake company’s history, which dates back almost a century.
The deal, valuing the maker of iconic treats such as Twinkies, Ho Hos and Ding Dongs at about $2.3 billion, including debt, comes four years after it nearly went out of business.
Gores Holdings Inc., a special-purpose acquisition company sponsored by an affiliate of the Gores Group LLC, will put up $375 million in cash it raised through an August IPO. In addition, Gores Group Chief Executive Alec Gores, current Hostess owners Dean Metropoulos and other Gores affiliates have committed an additional $350 million to the deal.
Afterward, funds managed by the current majority owners of Hostess—Apollo Global Management LLC and Mr. Metropoulos and his family—will hold a roughly 42% combined stake in Gores Holdings.
Gores shares rose 6% to $10.60 in afternoon trading on Tuesday.
Current Hostess management, including Mr. Metropoulos, who is executive chairman, and Chief Executive William Toler, will remain in place. The new company will be called Hostess Brands Inc. upon closing, expected in the third quarter.
The deal is seen as setting the company up for long-term growth by providing better access to capital to fund future innovation and acquisitions.
Hostess, which was founded in 1919 with the introduction of the Hostess CupCake, introduced the beloved Twinkie—a mix of cream filling encased in a tubular yellow cake—in 1930.
Hostess came near to perishing in 2012, saying it would go out of business after failing to reach agreement on wage and pension cuts with its second-largest union, representing thousands of bakers.
The move endangered American treats and snacks that have graced supermarket shelves for decades, but have had trouble keeping up with trends toward healthier snacking.
Hostess began winding down operations, selling off its 30 or so popular cake and bread brands and 36 plants, resulting in the loss of thousands of jobs. In January 2013, private-equity firms Metropoulos & Co. and Apollo swooped in to snap up Hostess’s cake business, including the Twinkie brand, for some $410 million.
Since then, the company has streamlined production by paring the number of bakeries and upgrading them with larger ovens and robots that pack Twinkies into boxes. In the liquidation, Flowers Foods Inc. and other buyers purchased the Hostess bread brands, which included Wonder Bread and Nature’s Pride, but Hostess has since started making bread products under its own name.
The Kansas City, Mo., company has gotten Twinkies, Ho Hos and other treats into new locations from movie theaters to Carl’s Jr. restaurants, which sell a Ding Dong ice-cream sandwich. Free of the pension costs and union contracts that weighed down its previous owners, Hostess has nurtured retail sales of its products nearly back to their pre-liquidation level of more than $1.3 billion in 2012, with a fraction of the workers. The old Hostess—which included other brands—employed some 19,000 people. The Twinkies purveyor these days has around 1,200.
Hostess, under its new owners, dropped the direct-store delivery model. It now ships products from its three bakeries in Indianapolis, Ind.; Columbus, Ga.; and Emporia, Kan., to a central warehouse in Chicago where they are bundled with each customer’s full order of Hostess products and sent to the retailer’s distribution center. At the retailer’s distribution center, Hostess products are loaded onto trucks with other items for delivery to individual stores, where store employees place them on shelves.
Mr. Toler in September told The Wall Street Journal that his focus was on growing the business and expanding Hostess beyond snack cakes, but “our plan would be to make it a public company” and “we’ll know when the time is right.”
Hostess reported revenue of about $650 million for the year ended May 31.
