(REUTERS) - Flowers Foods Inc is set to buy Hostess Brands Inc's bread brands including Wonder bread for US$360 million (S$445.2 million), a source familiar with the matter said on Wednesday, giving the No. 2 United States baking company a bigger slice of the fast-consolidating bread business.
Pending approval from a US bankruptcy court judge, Wonder Bread, along with Butternut, Home Pride, Merita and Nature's Pride, will go to Flowers after no other bidder stepped up to make a competing offer, a source familiar with the matter said on Wednesday.
Shares of Flowers, which makes Nature's Own bread and Tastykake snacks, were up 5.5 per cent in early afternoon trade, as the deal is expected to boost the company's margins and earnings.
Hostess, which is liquidating its business after 82 years, was set to run an auction on Thursday for the brands, but there will be no auction since there were no other bids, the source said.
There will be an auction for the Beefsteak brand, for which Flowers bid US$30 million, since Hostess received a higher bid from Mexico's Grupo Bimbo, said the source, who declined to be named as the process is private.
Grupo Bimbo bid US$1 million more for the Beefsteak brand, though its US$31.9 million bid includes a US$900,000 breakup fee.
Hostess declined to comment. Flowers and Grupo Bimbo did not immediately return calls seeking comment.
Flowers agreed in January to be the "stalking horse" bidder, which set a floor for the bidding and was subject to a court-supervised auction.
Flowers, founded in 1919 in Thomasville, Georgia, has grown over the years through a string of acquisitions.
It was the one-time owner of well-known brands including Keebler Foods and Mrs. Smith's pies.
SunTrust Robinson Humphrey analyst William Chappell expects the Hostess deal to add at least 30 cents per share to Flowers' earnings once the brands are integrated.
He expects to hear more about the company's estimates and strategy at a company-sponsored analyst meeting in New York next month. He has a "Buy" rating on the stock.
Hostess expects to run two more auctions next month. One would be for the Hostess snack cake brands, including Hostess Twinkies and Dolly Madison, for which private equity firms Apollo Global Management LLC and C. Dean Metropoulos & Co set the bidding at US$410 million.
The other would be for its Drake's cake business and additional bread brands.
So far, McKee Foods, maker of Little Debbie snack cakes, offered US$27.5 million for Drake's, which includes Ring Dings, Yodels and Devil Dogs.
United States Bakery Inc, also known as Franz Family Bakery, agreed to pay US$28.85 million for the Sweetheart, Eddy's, Standish Farms and Grandma Emilie's bread brands.
Flowers shares were up 5.5 per cent to US$29.22 on the New York Stock Exchange.
Grupo Bimbo shares were up 0.6 per cent at 33.18 pesos in trading in Mexico City.