WEBVTT - Bloomberg's Giammona on Hostess Brands Plan for an IPO (Audio)

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<v Speaker 1>Good afternoon, Katherine. Stocks have been under pressure today since

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<v Speaker 1>on Bill Maloney, Katherine, thank you Bill, and to hear

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<v Speaker 1>live breaking news over your Bloomberg type s q U

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<v Speaker 1>A K on your terminal, West Texas, Enemyia crude oil

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<v Speaker 1>eighteen dollars fifty cents a ounce at thirteen fifty seven

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<v Speaker 1>fifty and the tenure Treasury is up seconds with the

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<v Speaker 1>yield of one point three six percent. And that's a

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<v Speaker 1>Bloomberg business flash. You're listening to taking stock with pin

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<v Speaker 1>Box and Kathleen Hayes on Bloomberg Radio. Do you remember

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<v Speaker 1>what was it about three years ago when the shocking

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<v Speaker 1>news crossed the Bloomberg that the hostess Twinkie might be

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<v Speaker 1>on its way out of existence, Well, maybe not out

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<v Speaker 1>of the way of existence. But it was facing uh bankruptcy,

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<v Speaker 1>it was facing restructuring, and this iconic brand, in fact,

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<v Speaker 1>was very close to extinction before it was purchased by

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<v Speaker 1>Apollo Global Management and investor Dean Metropolis. And now we're

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<v Speaker 1>seeing Twinkies Baker Hostess to go public in a deal

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<v Speaker 1>with a very important investor. We're very happy to welcome

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<v Speaker 1>to the show Craig Gemona. He is a Bloomberg consumer

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<v Speaker 1>reporter and he wrote a terrific story about Twinkies today,

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<v Speaker 1>So remind us what happened to Twinkies. It looked like

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<v Speaker 1>it was on the verge of extinction, but it just

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<v Speaker 1>didn't seem possible. Even if they're filled with sugar and

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<v Speaker 1>not good with you. So many people grew up with them.

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<v Speaker 1>What happened, that's right, Well, they felt they've gott into

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<v Speaker 1>trouble twice in the last ten years. I think once

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<v Speaker 1>in two thousand nine, they emerged from bankruptcy only to

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<v Speaker 1>file again. You know about three years later they were

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<v Speaker 1>actually Twinkies were office else for about seven months. You know,

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<v Speaker 1>there was sort of the Facebook pages happened where Twinkies purchased,

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<v Speaker 1>like you said, and brought back to the market, and

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<v Speaker 1>now they're here and saying, basically, we've done pretty well

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<v Speaker 1>with it. They did what a private equity guys do.

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<v Speaker 1>They trimmed up the company, the workforces way down, they

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<v Speaker 1>consolidated the factories, and they're saying basically that they're back,

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<v Speaker 1>new and improved and they're ready to go public. Well,

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<v Speaker 1>you just mentioned something about the cuts that were implemented

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<v Speaker 1>as a result of the acquisition. Uh, this was also

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<v Speaker 1>a union issue, if I'm not mistaken, that's right. So

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<v Speaker 1>I think it's something I was looking at the presentation.

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<v Speaker 1>They discussed it this afternoon, something like eight thousand workers

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<v Speaker 1>down to twelve hundred, most of those union jobs. So

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<v Speaker 1>they cut out the costs. Again, that's the private equity

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<v Speaker 1>guys do. They said, you know, very fascinating point. They

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<v Speaker 1>increased the shelf life of their products from twenty five

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<v Speaker 1>to sixty five days, so Twinkies now can apparently last

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<v Speaker 1>longer than they could prior. And it's actually a myth

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<v Speaker 1>that Twinkies can you know, sustain nuclear attacks or whatever

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<v Speaker 1>the stories have been. But basically these guys are saying,

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<v Speaker 1>you know, we're doubling down on indulgence. We're not worried

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<v Speaker 1>about the headwinds. Millennials don't want sugar process sugar. We

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<v Speaker 1>think the Twinkies are an iconic brand and we're gonna

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<v Speaker 1>put it at the forefront of this new public company.

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<v Speaker 1>So the snowball survived too, and the cupcakes. That's right.

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<v Speaker 1>And you know, that's the funny thing that they're not

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<v Speaker 1>talking about gluten free organic. They're basically saying that, uh,

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<v Speaker 1>like you you remember it from childhood. There's nostalgia around

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<v Speaker 1>this brand, and maybe younger consumers like a good, authentic

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<v Speaker 1>American story. It's an iconic brand with a lot of

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<v Speaker 1>brand equity, and you know, we think we can sell

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<v Speaker 1>more of this stuff. Great. Looking at a little bit

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<v Speaker 1>of the details of the acquisition and Mr Metropolis, he's

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<v Speaker 1>got a hand in a variety of different businesses. For example,

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<v Speaker 1>I believe he owns the Paps Brewing he did he sold,

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<v Speaker 1>so it's interesting. Paps is a great example. You know,

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<v Speaker 1>he did with perhaps what I think they want to

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<v Speaker 1>do with Twinkies, right with Paps. Uh, he took it,

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<v Speaker 1>he sort of gave it. They gave it some hipster credentials.

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<v Speaker 1>They ran with that, and you know, perhaps more than

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<v Speaker 1>doubled over the last decade of sales. It's it's well,

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<v Speaker 1>really well known, so maybe there's a chance to do

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<v Speaker 1>that with Twinkies. This sugar question and the remains it doesn't.

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<v Speaker 1>It is a time when people are realizing that excess

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<v Speaker 1>sugar consumption can kind of make a train doing a diabetic,

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<v Speaker 1>make it gain weight, all kinds of things. Uh so,

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<v Speaker 1>what are the odds of overcoming that? I mean, I

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<v Speaker 1>don't need a lot of sugar, I figured, but eve

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<v Speaker 1>a little bit of sugar. Not it's not so bad.

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<v Speaker 1>It's just when people constantly consume, is there is there

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<v Speaker 1>a niche or for them? Do you think? I'm not sure.

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<v Speaker 1>I mean, people eat differently now than they did in

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<v Speaker 1>the fifties, sixties, seventies, and you know there's no question

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<v Speaker 1>that right now sugar is the health boogeyman. Probably number one.

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<v Speaker 1>People know what's good reason that's right, And the FDA

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<v Speaker 1>want is gonna is trying to make the companies call

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<v Speaker 1>out added sugar on the label. So everything sort of

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<v Speaker 1>that we know about health trends and eating trends would

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<v Speaker 1>point against headwinds for a company that is, like I said,

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<v Speaker 1>doubling down on sweetendulgers. They want to sell baked sugar,

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<v Speaker 1>process sugar, these kind of products. You know, there's brand

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<v Speaker 1>strength there, but no question that consumers have moved away

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<v Speaker 1>from this type of thing. Any talk about valuation for Hostess,

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<v Speaker 1>you know they were taught it's reasonable, is what I

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<v Speaker 1>heard so far. I mean, we haven't really gotten the

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<v Speaker 1>number out there. A lot of people obviously trying to

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<v Speaker 1>figure that out. I think it will be on the

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<v Speaker 1>smaller side. It's not gonna be a blockbuster, I p o.

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<v Speaker 1>But because of the names involved, I think a lot

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<v Speaker 1>of attention to it. Again. You know, Metropolis has had

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<v Speaker 1>some success turned around paths and now here they are

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<v Speaker 1>involved with Pinnacle Foods, and I believe that Bill Taller,

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<v Speaker 1>who is the chief executive of Hostess, is originally from

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<v Speaker 1>Pinnacle Foods. That's right. So a lot of things I

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<v Speaker 1>heard today is about these guys know how to execute.

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<v Speaker 1>There's good gross margins and and bread and baked goods

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<v Speaker 1>like that if they can execute so and like I said,

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<v Speaker 1>when you're looking at the financials that they put out

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<v Speaker 1>there today, sort of a bare bones, but they have

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<v Speaker 1>really cut the fat out of what Hostess used to be,

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<v Speaker 1>but not the sugar just right, So Craig, go real

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<v Speaker 1>quickly here, your food and reporter, what's on your horizon?

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<v Speaker 1>One of the one of the next big stories you're following. Obviously,

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<v Speaker 1>the Hershei Mondoles thing was got a lot of people

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<v Speaker 1>talking last week. Her She quickly came out and said that, um,

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<v Speaker 1>you know, they rejected the deal, but every one had

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<v Speaker 1>kind of been waiting for food deals to perk back

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<v Speaker 1>up again. Was a huge year with Kraft, Heins and

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<v Speaker 1>you know Buffet getting together with those guys to do

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<v Speaker 1>that deal. There's a lot of consolidation because of what

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<v Speaker 1>you're talking about. These uh CpG companies have had a

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<v Speaker 1>hard time with changing consumer taste, so was off to

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<v Speaker 1>a slow start. We got the Mondols Hershey news now this,

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<v Speaker 1>so there's a sign maybe that food deal making is

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<v Speaker 1>going to pick up here. Thanks for spending time with us.

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<v Speaker 1>Craigmona is food and restaurant reporter for Bloomberg News. Talking

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<v Speaker 1>about Hostess and it's impending initial public offering. Talking about

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<v Speaker 1>Hersheet that shares it down about a tens of a percent. Today,

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<v Speaker 1>you're listening to taking Stock. I'm pim Fox. My co

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<v Speaker 1>host Kathleen Hayes, and this is Bloomberg Cybersecurity. How about

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<v Speaker 1>tracking the emotions, the emails of people that work for

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<v Speaker 1>you to head off cyber attacks in the making. That's

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<v Speaker 1>coming up right now on Bloomberg Radio. This is Bloomberg