No. of Recommendations: 34
Hostess is going out of business.

Some blame the unions for not being willing to make concessions. Most of the unions had broken, but the bakers union would not yield.

Some blame the management, for a series of CEO's who each walked off with millions, or else awarded themselves millions, to sit in endless meetings with the unions knowing they would dismantle the company and sell off the brands without a pension obligation if it went south. They were winners either way, and are taking their Twinkie and eating the filling too.

I think it is fair to blame both parties. Both parties were seeking their best interest, as they saw it, and both got it. The employees unfortunately, will not fare as well.

The management walked off with millions, and the unions who span multiple companies, showed they would not put up with the siphoning of pension assets into millionaire bank accounts, and broke the company in this demonstration.

Hostess brands has been in a long decline, for the popularity of its fake food products has been slowly dropping in favor of whole foods and organic farming. From 2004-2009 Hostess closed 54 bakeries and 300 outlet stores, shedding 10,000 employees in the process. It had already been selling off brands, such as Sunbeam bread, to regional operators.

A series of CEOs began to populate the upper management ranks, replaced one by one by the board. One of the latest, Brian Driscoll, only agreed to be CEO provided he was paid 1.5 million a year and got a termination package of 2 million dollars whether he was successful or a failure at turning around the company. In March 2012, he was gone. In that time period, he had pumped up the salaries of all the executives, as an award for the previous round of union concessions which reduced salaries.

From managements point of view- why should they stick around on a sinking ship unless they got compensated for their risk?

From the unions perspective, the management was sucking away their salaries and pensions to line their bank accounts.

The company held mountains of debt, much of it in pension obligations. In the last restructuring, the purchasers of the company were hedge funds, who have as their primary interest increasing the value of their shareholders. Getting rid of the pension obligations but selling off the valuable brand names is a smart hedge fund move. The hedge funds are "Silver Point" and "Monarch" who are specialized in buying up distressed debt, and liquidating the companies if they are unable to reorganize in the manner that they desire. It is not known how much these hedge funds bought the debt for, but it is suspected they got the debt for pennies on the dollar and stand to come out ahead after selling off the brand names.

Drake's, Hostess and Twinkies product lines will be sold off. The worlds largest baker Grupo Bimbo wants to buy these, but will likely be blocked due to antitrust concern. Campbells will be a likely buyer.

Note the real demise of the company is that it was founded in the 1920's when food was expensive, perished quickly, and the Hostess products offered cheap lasting bread and goodies to a population who had never had these things. In the last 90 years- with the incredible advances in agricultural productivity, dropping food prices, and a rising interest in getting rid of carbs to shed pounds rather than eating them to survive, the company had become a relic of past consumer behavior. With fierce competition from alternative food products, shrinking margins, excessive leverage, and both sides viewing the other as not making enough concessions, it was destined to explode.

The best article to read about this corporate explosion is here:
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