Hostess, the company that makes Twinkies and other sugary snacks, has announced it's going out of business following a worker strike.
Hostess Brands on Friday received a court order for an expedited hearing on its request to
liquidate.
The hearing on liquidation request is scheduled for 2 p.m. Eastern time Nov. 19, in bankruptcy court in White Plains, N.Y.
The bankrupt maker of Twinkies and Wonder Bread, said it had sought court permission to go out of business after failing to get wage and benefit cuts from thousands of its striking bakery workers.
Hostess, which has about $2.5 billion in sales from a long list of iconic consumer brands of snack cakes and breads said it had suspended operations at all of its 33 plants around the United States as it moves to start liquidating assets.
"We'll be selling the brands and as much of the infrastructure as we can," said company spokesman Lance Ignon. "There is value in the brands."
Hostess said a strike by members of the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union that began last week had crippled its ability to produce and deliver products at several facilities, and it had no choice but to give up its effort to emerge intact from bankruptcy court.
The Irving, Texas-based company said the liquidation would mean that most of its 18,500 employees would lose their jobs.
In the Chicago area, Hostess employs about 300 workers making CupCakes, HoHos and Honey Buns in Schiller Park. Hostess also has a bakery in Hodgkins, where 325 workers make Beefsteak, Butternut, Home Pride, Nature’s Pride and Wonder breads.
Hostess spokesman Tom Becker confirmed that Hostess plants have closed, and the local factories in Hodgkins and Schiller Park ran their last production Friday morning. The company also has a plant in Peoria.
Calls to the Hodgkins and Schiller Park plants were not answered.
"I don't think it's a stretch to say there's a lot of sadness today," Becker said, adding that "18,500 people had jobs yesterday and knew they weren't going to have jobs anymore when they woke up today," referring to Hostess' total employee base.
"It's an extremely difficult decision for the company to have to make to shut down but unfortunately without the full involvement of its employees at the bakery, the company was unable to continue."
A statement on the Hostess Brands website begins with "Hostess Brands is closed."
According to Becker, most of the company's employees had approved an 8 percent pay cut for the coming year, but the members of the Bakery, Confectionary, Tobacco Workers and Grain Millers International Union had voted against the reduction and a change in the pension plan.
Becker stressed that lingering pension obligations and other expenses felled the company, and not demand for its products.
"Demand was never the issue," Becker said, adding that company revenue for the year-ended May 11 was $2.5 billion. "We have very loyal customers who love our products and continued to buy our products."
Hostess had given employee a deadline to return to work on Thursday, but the union held firm, saying it had already given far more in concessions than workers could bear and that it would not bend further. Union officials blamed mismanagement for the company's woes.
The company, which filed for bankruptcy in January for the second time since 2004, said it had filed a motion with U.S. Bankruptcy Judge Robert Drain in White Plains, New York, for permission to shut down and sell assets.
Hostess has 565 distribution centers and 570 bakery outlet stores, as well as the 33 bakeries. Its brands include Wonder, Nature's Pride, Dolly Madison, Drake's, Butternut, Home Pride and Merita, but it is probably best known for Twinkies - basically a cream-filled sponge cake.
"We do not have the financial resources to weather an extended nationwide strike," Chief Executive Officer Gregory Rayburn said in a statement. "Hostess Brands will move promptly to lay off most of its 18,500-member workforce and focus on selling its assets to the highest bidders."
The company said in court filings that it would probably take about a year to wind down. It will need about 3,200 employees to start that process, but only about 200 after the first few months.
Gary Stibel, founder of the New England Consulting Group, said "the jury's still out," on the future of Hostess Brands, adding that the firm may be able to "work something out in the eleventh hour."
"There's a lot of activity going on," said Stibel, who added that his group is involved in the conversations, but not representing Hostess. "Let's just say there are a lot of folks who are going to be working over the weekend."
"This is no different than the fiscal cliff," Stibel said. "You've got different parties with very strong points of view, not coming together."
Stibel said the only thing for certain is that "these brands aren't going anywhere."
Union President Frank Hurt said the company's failure was not the fault of the union but the "result of nearly a decade of financial and operational mismanagement" and that management was trying to make union workers the scapegoats for a plan by Wall Street investors to sell Hostess.
Hostess said its debtor-in-possession lenders had agreed to allow it to retain access to $75 million to fund the wind-down process.
The company has canceled all orders with its suppliers and said any product in transit would be returned to the shipper.
Hostess had been gauging acquisition interest for certain brands for months and in late September received "a number of potentially viable proposals" to purchase certain assets.
SunTrust Robinson Humphrey analyst William Chappell Jr. said Flowers Foods Inc. could be among the potential buyers for some Hostess assets. And he said the company's liquidation was a “positive step” for the sector because it will reduce the number of major vendors.
In addition to Flowers, Bimbo Bakeries USA, a division of Mexico-based Grupo Bimbo, and Pepperidge Farm, a division of Campbell Soup Co., were considered prospective buyers, analysts said.
Bloomberg News reported late Friday afternoon that Pabst Brewing Co. owner C. Dean Metropoulos & Co. is considering an offer for the company.
In its filing with the court, the company said it would have incurred a loss of between $7.5 million and $9.5 million from Nov. 9 to Nov. 19 in lost sales and increased costs.
"These losses and other factors, including increased vendor payment terms contraction, have resulted in a significant weakening of the debtors' cash position and, if continued, would soon result in the debtors completely running out of cash," it said.
Hostess had already reached an agreement on pay and benefit cuts with the International Brotherhood of Teamsters, its largest union.
In its January bankruptcy filing, Hostess listed assets of $981.6 million. In a February filing, it assessed the value of its patents, copyrights and other intellectual property at some $134.6 million, although it did not break down the value by brands.
The company's last operating report, filed with the bankruptcy court in late October, listed a net loss of $15.1 million for the four weeks that ended in late September, mostly due to restructuring charges and other expenses.
The case is In re: Hostess Brands Inc., U.S. Bankruptcy Court, Southern District of New York, No. 12-22052.
Tribune reporter Emily Bryson York contributed to this story.
