Interstate Bakeries and Interstate Brands The company has its roots in Nafziger Bakeries, founded by
Ralph Leroy Nafziger in a church basement at 6th and Prospect Avenue in Kansas City in 1905. Nafziger expanded the bakeries and bought out competitors. In 1925 he sold Nafziger to Purity Bakeries (which became American Bakeries) and acquired a controlling interest in
Schulze Baking Company and its
Butternut Breads brand. In 1930 Nafziger announced the formation of the Interstate Bakeries Corporation (IBC) with the merger of Schulze Bakery and the seven bakers of Western Bakeries of Los Angeles to become the fifth largest baker in the United States. The company sold Butternut bread, wrapped in
gingham, to grocery stores. In 1943 Interstate acquired the Supreme Baking Company of
Los Angeles, and in 1950 it bought the O'Rourke Baking Company of
Buffalo, New York. Acquisitions during the 1950s and early 1960s included the Ambrosia, Remar, Butter Cream, Campbell-Sell and Schall Tasty baking companies, the Kingston Cake and Cobb's Sunlit bakeries, Sweetheart Bread Company and Hart's Bakeries. Continental had acquired Taggart Bakeries of
Indianapolis in 1925, and the deal brought Taggart's creations (including
Wonder Bread and the Hostess brand) to Interstate. Taggart had created Hostess in 1921, and the brand focused on cakes like
Twinkies,
CupCakes,
Ding Dongs and
Ho Hos (created during Continental's ownership). At this time, the merged company also bought the San Francisco French Bread Company, John J. Nissen Baking Company,
Drake's and My Bread Company. and market forces reduced prices and sales.
Bankruptcy (2004) On September 22, 2004, Interstate Bakeries filed for
Chapter 11 bankruptcy. The company named a new chief executive, Tony Alvarez. Interstate Bakery's stock, which had been $34 per share, fell to $2.05 with the bankruptcy. During the bankruptcy proceedings (at the time, the longest-running in U.S. history), Interstate fought a 2007 bid from Mexican baker
Grupo Bimbo and Ron Burkle of the
Yucaipa Companies. Under Craig Jung, Interstate Bakeries emerged from bankruptcy as a private company on February 3, 2009. The plan included a 50-percent equity stake by
Ripplewood Holdings and credit lines from
General Electric Capital and
GE Capital Markets, Silver Point Finance and Monarch Master Funding. Interstate's unionized workers made contract concessions in exchange for equity in the company. During the 2004–2009 bankruptcy period Interstate closed nine of its 54 bakeries and more than 300 outlet stores, and its workforce declined from 32,000 to 22,000. The company dropped regional brands and operating agreements, such as an agreement to produce
Sunbeam Bread for the northeastern U.S. The company's subsidiaries, such as Interstate Brands Corporation and IBC Sales Corporation, continued displaying their name and logo on Hostess Brands products.
Bankruptcy and liquidation In December 2011, it was reported that Hostess Brands was on the verge of filing for bankruptcy a second time. The company stopped paying future pension benefits after August, breaking its union contracts. According to a Hostess employee, "We understand that, should we pursue some form of legal action to require the company to live up to the terms of the contract, they may close, but we have come to believe that they will close anyway. We believe the company is poorly managed and the only hope is a complete change in management". and was replaced by
Gregory F. Rayburn, who had been hired as
chief restructuring officer nine days earlier.
Fortune reported that unions in the company were unhappy with Driscoll's proposed compensation package of $1.5 million, plus cash incentives and $1.95 million in long-term compensation. The court had discovered that Hostess executives received raises of up to 80 percent the previous year. Rayburn cut the salaries of the four top Hostess executives to $1, to be restored by January 1 of the following year or earlier. In July 2012, the
New York Post reported that negotiations with the
Teamsters Union, led by Silver Point Capital, were close to an agreement allowing Hostess Brands to cut employee pay and benefits if the company continued funding its pension plans. In May, as required by the
Worker Adjustment and Retraining Notification Act, the company's 19,000 workers were warned of a possible
layoff. In an email to the
Marysville, California Appeal-Democrat, Hostess spokesman Erik Halvorson wrote that the May notices were to alert employees to a possible sale of the company but "our goal is still to emerge from bankruptcy as a growing company with a strong future". Although the layoff notices listed July 7–21 as dates, on July 5 another company spokesman told the
Financial News & Daily Record that there were no immediate plans to lay off Hostess employees. In November 2012, Hostess employees nationwide went on strike. The
Bakery, Confectionery, Tobacco Workers and Grain Millers International Union (BCTGM), representing 6,600 Hostess employees, took action after a contract proposal from Hostess Brands was rejected by 92 percent of its members. On November 16, Hostess announced that it was ceasing its plant operations and laying off most of its 18,500 employees. The company said that it intended to sell off its assets (including its well-known brand names) and liquidate. According to CEO Gregory Rayburn, "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." A BCTGM press release issued that day read in part, "When a highly-respected financial consultant, hired by Hostess, determined earlier this year that the company's
business plan to exit bankruptcy was guaranteed to fail because it left the company with unsustainable debt levels, our members knew that the massive wage and benefit concessions the company was demanding would go straight to Wall Street investors and not back into the company." According to Rayburn, potential buyers expressed interest in acquiring the Hostess brand. On November 21, Judge Robert Drain cleared Hostess to close. Drain left Rayburn in charge of the liquidation; Hostess had argued that its assets would devalue if the company had to wait for a trustee to get up to speed on the company. Hostess Brands' liquidation plan was finalized by a federal bankruptcy judge on November 29. In January 2013, the company asked a judge to set a March 21 deadline for workers to file back-pay claims. On February 11, a U.S. Bankruptcy Court judge in New York approved
stalking horse bidders for Hostess Brands. The company received bids for assets from
Walmart,
Target,
Kroger,
Flowers Foods and
Grupo Bimbo, and was expected to sell its snack-cake and bread brands during 2013. On January 8, 2013, Hostess Brands hired Hilco to sell its equipment, machinery and real estate. Three days later the company announced a $390 million stalking-horse bid by Flowers Foods for six of its bread brands (including Wonder Bread), and court approval was received for a February 28 auction of the brands. On January 15, 2013, Hostess Brands began searching for a stalking-horse bidder for its snack cakes; four companies (Grupo Bimbo, a partnership of
Apollo Global Management and C. Dean Metropoulos and Company, Hurst Capital and
McKee Foods) were negotiating. Two weeks later the company picked Apollo Global Management and C. Dean Metropoulos and Company as lead bidder for its snack cakes, with the bid deadlines for all Hostess brands March 11 and 12.
Buyers It was announced on January 28, 2013, that
United States Bakery was the leading bidder for Hostess' Sweetheart, Eddy's, Standish Farms and Grandma Emilie's brands and
McKee Foods was the leading bidder for its Drake's brand, which included
Ring Dings,
Yodels and
Drake's Devil Dogs. On March 11,
Apollo Global Management made the sole bid ($410 million) for the company's snack business, which included Twinkies; this company later went public under the name Hostess Brands and trade on the
New York Stock Exchange under ticker TWNK.
Hostess Brands On June 6, 2013, the new Hostess Brands reopened the
Emporia, Kansas plant. Hostess announced ten days later that production would resume the following month, and on June 23 said that its brands would be back on store shelves on July 15. although the company would sell fewer products than before, new president Rich Seban said that it might produce innovative pastries and snacks. "We can have some fun with that mixture," Seban said, suggesting that Hostess might experiment with gluten-free, higher-fiber and lower-sugar and -sodium products. On September 11, 2023,
The J.M. Smucker Company announced it would buy Hostess for $5.6 billion in a cash and stock deal. ==Brands==