Who Will Buy Wonder Bread ?

Implications: The recent article on Interstate Bakeries bankruptcy hearings now officially puts the company in play.IBC struggling from high plant and route costs and the unprecedented rise in flour costs has been attempting to emerge from bankruptcy.IBC Management has stated that their proposal values the company at  a value of at least $580mm.Yucaipa and Bimbo (Mexican bread retailer and owner of the Oroweat brand) have formed a group to propose an alternative deal.The result has been to effectively put IBC up for sale to all competing companies.

Analysis:

 The baking industry has been due for consolidation for several years.Too many manufacturers and rising commodity costs have hurt all companies profit margins.So is this latest news the start of a bidding war for Wonder bread and IBC ?
 There are several companies that would be logical candidates to acquire IBC. First, Yucaipa and the Bimbo consortium has already expressed a strong interest and have the inside track due to their discussions with the powerful Teamster union.However several other players should also be considered.George Weston Foods( owner of Loblaws the largest Canadian retailer) also owns the Entenmanns, Thomas,Arnold/Brownberry,Freihofer & Stroehmans brands of bread cakes & bagels.Sara Lee is also a top bread maker and would be a good fit.Lastly, don't forget Flower's the owner of the Nature's Own breads in the Southeast.

All four companies have the size and resources to make a bid for IBC and have the ability to successfully integrate IBC's brands and products into their organizations.I also believe that all four companies will provide a better alternative than IBC staying independent.

Rick Shea is a former Vice-President of Marketing for George Weston Foods