Interstate Bakeries Receives Preliminary Indication of Interest From Yucaipa Companies and Teamsters Union
Published December 17th, 2007
Interstate Bakeries Corporation (IBC) (OTC:IBCIQ) today confirmed that it received a preliminary indication of interest yesterday from The Yucaipa Companies, LLC and The International Brotherhood of Teamsters describing a “possible plan of reorganization” for emergence of IBC from Chapter 11.
The document incorporates some of the terms of the Plan of Reorganization filed by IBC on November 5, 2007, but is silent on a number of critical issues, IBC said.
The document states that Yucaipa and the Teamsters will “provide creditors with aggregate consideration based on an enterprise value of $580 million.” However, it does not specify how much will be distributed to unsecured creditors. It does not include any business plan. It does not provide any details on how a Yucaipa business plan would be financed, or include any financing commitments. Finally, it does not describe the terms and concessions the Teamsters will provide to the reorganized company, or any indication that any agreement has been reached with any of the other unions that represent more than 11,000 IBC employees.
Because of those and other deficiencies in the document, IBC has concluded that the document is not a Qualified Bid under the terms of the Alternate Proposal Procedures approved by the Bankruptcy Court in November.
The Company does intend to engage in further discussions with Yucaipa and the Teamsters to determine whether they intend to make a complete proposal that provides missing essential information, as described above.
“We are pleased that Yucaipa and the Teamsters continue to express interest in the Company’s emergence from Chapter 11. At the same time, we are surprised and disappointed at the lack of substance in their submission. Our goal in the Chapter 11 process is to maximize value for IBC’s constituents. We look forward to resolving the many deficiencies in their current document, in order to determine whether they might be able to provide better value to constituents than under the Company’s current plan,” said Chief Executive Officer Craig Jung.
The preliminary indication of interest IBC received states that the Teamsters agree to work exclusively with Yucaipa until such time as Yucaipa decides not to pursue the possible transaction.
In response, Mr. Jung said, “We call on the Teamsters’ leadership to engage in serious discussions with all other interested parties, including IBC, to ensure that all potential plans to maximize value can come to light. IBC continues to stand ready to reach a mutually acceptable agreement with the Teamsters that will save more than 24,000 jobs.”
If Yucaipa and the Teamsters provide a definitive and complete proposal, IBC’s management and Board of Directors will carefully evaluate it to determine whether it represents the highest or otherwise best proposal, the Company said. In the meantime, IBC will not comment further on the document they submitted December 13.
Separately, IBC has been notified by the U.S. affiliate of Grupo Bimbo, S.A. de C.V., a Mexico City-based baking company, that Grupo Bimbo does not intend to make an offer to IBC at this time. Grupo Bimbo was not a party to the preliminary indication of interest provided to IBC yesterday by Yucaipa and the Teamsters. Grupo Bimbo also communicated its thanks for the professionalism and cooperation of IBC’s employees and advisors during the due diligence process. “Although we are disappointed that Grupo Bimbo chose not to participate, we deeply appreciate and respect the professionalism that Grupo Bimbo’s executives and advisors demonstrated during their due diligence review,” said Mr. Jung.
IBC said it intends to continue with its previously announced alternative bid/auction process. Under that process, alternative proposals must be submitted by January 15, 2008. In the event multiple bids are received, an auction will be held on January 22, 2008. A hearing is currently scheduled before the Bankruptcy Court in Kansas City on January 29, 2008, at which the Court can approve the highest or otherwise best offer.
IBC said that other parties have expressed interest in entering the bidding process, and have sought and obtained access to extensive confidential information on IBC. Some parties have expressed interest in making competing plan proposals, while others have expressed interest in purchasing select assets of the Company, IBC said. Whether any of these prospective bidders will actually present an alternative bid cannot be predicted at this time, the Company said.
About the Company
Interstate Bakeries Corporation is one of the nation’s largest commercial bakers and distributors of fresh-baked bread and sweet goods, sold under various brand names, including Wonder®, Merita®, Home Pride®, Baker’s Inn®, Hostess®, Drake’s®, and Dolly Madison®. The company is headquartered in Kansas City, Missouri.
Interstate Bakeries Corporation filed for bankruptcy protection on September 22, 2004, citing liquidity issues resulting from declining sales, a high fixed-cost structure, excess industry capacity, rising employee healthcare and pension costs, and higher costs for ingredients and energy. The Company continues to operate its business in the ordinary course as a debtor-in-possession.
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