Gores Holdings Inc. (NASDAQ CM: GRSHU, GRSH, GRSHW), a special purpose acquisition or ‘blank check’ company sponsored by an affiliate of private equity firm The Gores Group LLC, agreed to acquire Hostess Brands LLC, maker of Hostess Twinkies, Ding Dongs and CupCakes, from HB Holdings LLC, which is owned by private equity firm Apollo Global Management LLC (NYSE: APO) and Metropoulos and Co., in a reverse merger deal with an enterprise value of approximately $2.3 billion or 10.4x the $220 million estimated 2016 adjusted EBITDA of Hostess Brands.

Funds managed by Apollo Global Management and C. Dean Metropoulos and family, the current majority owners of Hostess, expect to hold an approximately 42% combined stake in Gores Holdings upon completion of the transaction. Dean Metropoulos and William Toler will continue to lead the company as executive chairman and CEO, respectively.

Along with $375 million of cash held in Gores Holdings’ trust account, additional investors have committed to participate via $350 million private placement, led by Alec Gores, chairman and CEO of the Gores Group, and comprising large institutional investors, C. Dean Metropoulos (via $50 million of additional rollover contribution), and Gores affiliates. Gores Holdings completed its initial public offering in August 2015, raising approximately $375 million in cash proceeds.

Hostess is a bakery company founded in 1919 with the introduction of the Hostess CupCake to the American public. In 1930, Twinkies were introduced, which was an event many say changed the snack cake world. Today, Hostess Brands produces a variety of new and classic treats including Ding Dongs, Ho Hos, Donettes and Fruit Pies, in addition to Twinkies and CupCakes.

Hostess had revenues for the twelve months ended May 31, 2016 of approximately $650 million and operates three baking facilities located in Emporia, Kansas; Indianapolis, Indiana; and Columbus, Georgia.

Hostess Brands LLC was formed in June 2013 as a result of a corporate reorganization and restructuring. The company is separate from Old HB, which was formerly known as Hostess Brands Inc. from 2009–2013. Old HB is currently under liquidation and sold its cake business to Apollo and Metropoulos creating the current Hostess Brands. The current Hostess Brands was formed as New HB Acquisition LLC to acquire the cake business (Hostess and Dolly Madison brands) of Hostess Brands Inc. Following the conclusion of the sale, Hostess Brands Inc. became Old HB, Inc. and New HB Acquisition became Hostess Brands LLC.

“I have enjoyed working together with Apollo to build a vibrant and exciting company, and we are pleased to partner with the Gores Holdings team as we move to the next stage of Hostess’ growth and expansion,” stated Dean Metropoulos.

“Hostess presents a unique opportunity to invest in an iconic brand with strong fundamentals that is poised for continued growth,” said Alec Gores.

“Hostess possesses exciting continued organic top-line growth potential and is one of the highest EBITDA margin and cash generative food platforms in the U.S. We look forward to continuing our partnership with Dean and Bill, along with the team at Gores, to further grow and build Hostess,” said Andy Jhawar, senior partner and head of Consumer and Retail at Apollo.

The transaction has been unanimously approved by the boards of directors of both Gores Holdings and Hostess, and is expected to close in the third quarter of 2016, subject to the receipt of regulatory approval, and approval of the stockholders of Gores Holdings. Upon closing of the transaction, the name of the company will be changed to Hostess Brands Inc.

Deutsche Bank Securities Inc. acted as lead capital markets advisor, along with Moelis & Company and Morgan Stanley, and financial advisor and Weil, Gotshal & Manges LLP acted as legal advisor to Gores Holdings. Rothschild & Co., Credit Suisse and Perella Weinberg Partners acted as M&A advisors to Hostess. Morgan, Lewis & Bockius acted as legal advisor to Apollo. Paul, Weiss, Rifkind, Wharton & Garrison acted as legal advisor and UBS acted as financial advisor to C. Dean Metropoulos and his family.

Founded in 1987 by Alec Gores, the Gores Group is a global investment firm focused on acquiring controlling interests in mature and growing businesses which can benefit from the firm’s operating experience and flexible capital base. Over its 25 year history, The Gores Group has become a leading investor having demonstrated a reliable track record of creating value in its portfolio companies alongside management. Headquartered in Los Angeles, the Gores Group maintains offices in Boulder, Colorado, and London.

Apollo is a leading global alternative investment manager with offices in New York, Los Angeles, Houston, Chicago, Bethesda, Toronto, London, Frankfurt, Madrid, Luxembourg, Singapore, Mumbai, Delhi, Shanghai and Hong Kong. Apollo had assets under management of approximately $173 billion as of March 31, 2016, in private equity, credit and real estate funds.

Metropoulos & Co. is a merchant banking and management firm focused principally on the food and consumer sectors in the United States and Europe. C. Dean Metropoulos and his management team partners have been involved in more than 81 acquisitions with over $12 billion of aggregate transaction value. Companies where Metropoulos & Co. has been an investor and Metropoulos has been an executive include: Pabst Brewing Company, Pinnacle Foods, Aurora Foods, Stella Foods, The Morningstar Group, International Home Foods, Ghirardelli Chocolates, Mumm and Perrier Jouet Champagnes and Hillsdown Holdings, PLC (Premier International Foods, Burtons Biscuits and Christie Tyler Furniture), among others.



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