TWINKIES EXPAND THEIR PORTFOLIO. Hostess touted the financial benefits of the acquisition, including the long-term growth impacts. By Todd Horwitz, Bubba Trading.

 

Hostess Makes $320 Million Acquisition

The maker of Twinkies wants to expand its portfolio with a new bet on wafers, cookies and sugar-free treats.

Hostess Brands Inc. on Monday said it struck a deal to buy Voortman Cookies Ltd. for about $320 million in cash from Swander Pace Capital, a private-equity firm that acquired a majority stake in the baker in 2015.

Founded in 1951, Voortman makes cookies but is known for being the leader among companies that produce creme-filled wafers and sugar-free cookies, according to Hostess. Voortman’s wafers come in a range of flavors, from lemon to chocolate hazelnut to pumpkin spice, and are made with and without sugar.

This latest deal diversifies Hostess’ product mix and increases its focus in sweet baked goods and snacking by adding Voortman crème wafers and sugar-free cookies to the fold. While Hostess owns many of the nation’s favorite sweet baked goods, it has no cookies. And Voortman’s sugar-free cookie line allows Hostess to also be in the better-for-you dessert segment.

Hostess touted the financial benefits of the acquisition, including the long-term growth impacts. The Twinkie maker said it expected earnings per share to increase in the mid-single digits next year because of the deal, with double-digit increases thereafter. Under the watch of Callahan, who took the helm in May 2018, Hostess has undergone a series of major changes to place the company on firmer financial footing.

It sold in-store bakery maker Superior Cake Products to Sara Lee Frozen Bakery for $65 million. Historically, Hostess has succeeded in developing creative new variations on its mainstay, center-of-the-store brands, so it may have found it difficult to make a move to the premium and fast-growing in-store bakery channels.

The company also announced in August that it would move its corporate headquarters from Kansas City, Missouri to Kansas City, Kansas after receiving tax incentives and tax credits. Hostess has shunned big deals in favor of smaller bolt-on acquisitions such as Voortman, though it was rumored to be among the interested buyers for Kellogg’s Keebler and Famous Amos brands — eventually sold to Ferrero for $1.3 Billion.

Hostess’ slow, methodical approach to adding smaller brands to the mix allows the company to carefully integrate products into its operations. The company is able to generate meaningful cost synergies and grow the brands by applying its product procurement, manufacturing, distribution and sales network expertise when it makes an acquisition — a point Hostess highlighted in the press release announcing the Voortman deal. ​

Todd “Bubba” Horwitz

Financial Markets and Political Commentary

 

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Todd Horwitz - Author of “Average Joe Options“. Todd began his trading career in 1980 at the CBOE. He was one of the original traders in the OEX & helped start the SPX. He is a member the CME where he trades S&P futures as well as foreign currencies & is a regular contributor to CNBC, Bloomberg, BNN, Fox & many other major news networks.