Kansas City-based Hostess Brands Inc., maker of Twinkies, Ho Hos and other snack cakes, is proving a good investment for two private-equity firms that pulled the company out of bankruptcy.
Apollo Global Management LLC and Metropoulos & Co. are reducing their holdings in the snack cake side of the business that they acquired for $410 million in Hostess’ 2013 liquidation.
Since going public, the reborn Hostess Brands company has returned about 40 percent on investment and has an estimated market value of $2.1 billion.
Apollo and Metropoulos last year sold their majority stakes in Hostess to Gores Group, another private-equity firm. Gores put $375 million in cash into the deal and raised another $350 million in private placement investments, with Metropoulos and Apollo maintaining a 42 percent minority stake in the company.
Gores then set up a special purpose acquisition company that took the company public Nov. 7.
Through a public offering, Apollo said it will cut its ownership stake to 2.6 percent. Metropoulos will cut its holdings to 24.9 percent. Gores will cut its holdings to 12.8 percent.
Hostess is one of the U.S. stock market’s best-performing new listings. In its first quarterly report as a reborn public company, Hostess said sales were surging and profits were higher than expected. For 2017, it forecast net revenue of $781 million and earnings of $235 million, before paying taxes or interest on debt or other charges.
The turnaround came at a cost, though, for a couple former snack cake bakeries, which were closed, and thousands of former Hostess employees, who were fired in the bankruptcy. Some of the former employees returned to the reorganized company, typically at lower pay and without collective bargaining agreements.
The reopened bakeries, including the snack cake facility in Emporia, Kan., benefited from new equipment, delivery efficiencies and the introduction of new products.
A separate part of the former Hostess operations, the bread bakery side, was acquired out of bankruptcy by Flowers Foods, a public company that paid about $360 million for that line. Flowers reported sales grew 3.9 percent to $3.927 billion in 2016 and expects comparable sales in the current year.