A Georgia food company announced a $34.4 million cash deal Monday to acquire Tasty Baking Co., the iconic maker of Tastykakes and other packaged sweets that earlier this year was forced by financial difficulties to explore a merger or sale.
Thomasville, Ga.-based Flowers Foods Inc., which makes breads, buns, rolls, snack cakes, pastries, and tortillas, is paying $4 a share for Tasty Baking's 8.6 million shares outstanding. The price is more than double Tasty Baking's closing price Friday of $1.61 a share.
In afternoon trading Monday, Tasty Baking shares jumped $2.36 to $3.97. Flowers Foods shares rose 2 percent, or 55 cents, to $28.21.
Including assumed debt, the companies say the deal is worth $165 million.
The boards of both companies have unanimously approved the deal, according to a statement, and the acquisition is expected to close in the second quarter.
Philadelphia-based Tasty, whose line of packaged sweets includes Kandy Kakes and Krimpets, will become part of Flowers' direct-store-delivery business. Founded in 1914, Tasty Baking is one of the most well-known brands in the City of Brotherly Love and employs about 740 people in the Philadelphia region.
Flowers Foods, whose brands include Nature's Own and Bunny breads, has about 8,800 employees at its 39 bakeries.
George E. Deese, Flowers Foods' chairman and CEO, said in a statement, "The merger will expand Flowers' geographic reach and bring new consumers, new customers, and new opportunities for further growth."
Charles P. Pizzi, Tasty Baking's president and CEO, said the move will create value for shareholders, customers and employees alike.
"We look forward to working closely with the Flowers team to complete the merger as quickly as possible and to ensure a smooth transition," Pizzi said.
Marta Jones Turner, a spokeswoman for Flowers Foods, said it was too early to know if the move would result in any job cuts, but added that Flowers Foods expects to continue expanding the company.
Officials with Flowers Foods and Tasty Baking said they could not comment on Pizzi's future with the company.
In January, Tasty Baking said "unanticipated operational challenges" related to its new bakery in Philadelphia's Navy Yard had lowered projected savings for the fourth quarter of 2010 by $3 million to $10 million, and that it was looking into a possible merger or sale.
It also cited a bankruptcy filing by the owner of the A&P, Super Fresh and Pathmark grocery chains and rising commodity costs as contributing factors to the financial squeeze.
The company had said some of its lenders agreed to defer some payments related to the construction of its $78 million bakery and warehouse.
Lovers of the company's pies, cakes and other sweets had fretted for months about the company's fate, hoping that the financial strains would not put an end to sweets many say are rivaled only by the cheesesteak as a Philadelphia food.
Edward Murphy, 59, ran out of Tastykakes while watching the Phillies game Sunday and was waiting for a bus in Center City, heading on a shopping trip in which he would replenish his stash of Krimpets and pies.
Murphy had been worried about the fate of Tasty Baking for months, not only because he loves the sweets, but also because he has about 10 relatives who work for the company.
"I was concerned about the people and their jobs," said Murphy, a lifelong Philadelphian who had heard news of the sale on Monday morning. He said he was also relieved the city would not lose the maker of one of its most well-known brands.
"The Tastykake is Philadelphia," Murphy said. "Tastykakes here are more popular than cheesesteaks."