• by Thom Forbes  @tforbes, July 6, 2016

Hostess Brands LLC is proving that you can have your CupCakes, et al., and make a killing on them, too. Nearly four years after the purveyor of Twinkies was brought out of bankruptcy by investment firms Metropoulos & Co. and Apollo Global Management, it is planning to go public in the fall at a valuation of $2.3 billion. That’s “10 times their original investment of $185 million,” sources tell the Wall Street Journal.

“The company will go through a complex deal on its route to becoming public, with investors including Alec Gores’s firm ponying up $725 million,” report Bloomberg’s Thomas Mulier and Craig Giammona. Gores Holdings Inc. is a special purpose acquisition company (SPAC), which has “no assets but use their IPO proceeds, together with bank financing, to take companies public through acquisitions,” reports the Toledo Blade.

Apollo Global Management and Metropoulos will own 42% of the company, which will be renamed Hostess Brands Inc. 

“We look forward to continuing both our strong organic growth through unique innovations and niche, strategic acquisitions, such as our recent acquisition of Superior Baking, which will extend Hostess' consumer reach in the ‘in-store bakery’ market and expand offerings to customers,” C. Dean Metropoulos, who will continue as executive chairman of the company, said in a statement. William Toler will remain CEO.

“While Twinkies have strong brand recognition, taking Hostess public will test investors’ appetite for a company that trades in the kind of processed sugary treats that Americans are increasingly trying to avoid. That trend took a toll on Hostess in recent years, contributing to the company’s two bankruptcies in the past decade,” Mulier and Giammona point out.

“Regardless of the headwinds facing sweet snacks, Hostess plans to double down on indulgence, according to Toler. The company has improved the shelf life of Twinkies and will introduce frozen varieties to grocery stores later this year,” they report.

Presumably, Hostess will also keep doing a lot of what they’ve been doing to promote the brand.

“The new company focused on alternative marketing, hoping that tributes by celebrities like Will Ferrell and a countdown clock in New York’s Times Square would help the return go viral. It worked. Hostess said its share of the sweet baked-goods market has grown slightly to 16.3% since the relaunch,” Annie Gasparro and Matt Jarzemsky report for the Wall Street Journal. “Last year, the company started to expand to new products — notably bread. It started selling white and wheat bread under the Hostess name, as well as buns for hamburgers and hot dogs to convenience, drug and dollar stores.”

“Metropoulos, who has a knack for buying faded brands like Pabst Blue Ribbon beer and revitalizing them, did the same for Hostess,” writes Robert Cyran for the New York Times. “More efficient production and a shift to warehouse distribution knocked sales but lifted Ebitda margins, which stand at around 33% today. Investors were so tempted by Hostess, they gobbled up a debt offering that allowed the owners to take a $905 million special dividend last year.”

Those efficiencies include massive layoffs and plant closings. 

“According to a presentation the company made on Tuesday to investors, payroll has shrunk from about 8,000 mostly union jobs to 1,170 now. It has slashed the number of bakeries from 11 to 3, although it invested $130 million to improve its manufacturing capabilities,” writes Jonathan Berr for CBS News’ “Moneywatch.” And its lineup has been pared from 150 products to 90, although “it has added new twists on old favorites, such as chocolate Twinkies.”

Hostess was founded in 1919 with the introduction of the Hostess CupCake. Twinkies were introduced in 1930 and the current lineup includes Ding Dongs, Ho Hos, Donettesand Fruit Pies. When it appeared that it might be going out of business in November 2012, crazed customers across the country reportedly snatched up their favorite treats from store shelves.

“Among the buyers were some of Beverly Hills billionaire Alec Gores’ five children,” reports James Rufus Koren for the Los Angeles Times. 

“Even my own kids were out trying to buy the last Twinkies,” Gores tells him. “It’s a big brand. It has big, iconic products.” Writes Koren: “Now, it’s Gores himself who wants a piece of the sugary snack maker.”

And, he’s betting, lots of other folks with brokerage accounts.