The US maker of cream-filled cakes Twinkies is set to be sold to private equity firm Gores Group, who will then take it public.
The $725m (£555m) deal for Hostess Brands will leave current owners Apollo Global Management and consumer industry investor C Dean Metropoulos as major share holders in Gores.
Hostess generated sales of about $650m in the 12 months to 31 May.
“We have evaluated a number of potential acquisitions for Gores Holdings and believe this transaction offers a superior option for our stockholders,” Gores Group chief executive Alec Gores said in a statement.
Gores Group raised $375m in an initial public offering last year to finance acquisitions. Under the terms of the deal, Gores Holdings will pay out most of the cash that it raised in its IPO.
Gores Group also owns a stake in the UK-based bread maker Hovis.
Kansas City-based Hostess is expected to have an enterprise value of $2.3bn once it comes to market, and Hostess and Gores expect the deal to close in the third quarter.
Metropoulos will remain executive chairman of Hostess, and William Toler will continue as chief executive.
Deutsche Bank Securities, Moelis & Co and Morgan Stanley were financial advisers to Gores, while Weil, Gotshal & Manges LLP was the legal adviser. Rothschild & Co, Credit Suisse and Perella Weinberg Partners were acquisition advisers to Hostess. Morgan, Lewis & Bockius was legal adviser to Apollo.
Paul, Weiss, Rifkind, Wharton & Garrison was legal adviser and UBS acted as financial adviser to C Dean Metropoulos and his family.
Hostess, founded in 1919, was saved from bankruptcy by Apollo and Metropoulos in 2013 – the company’s second bankruptcy filling.