Hostess has picked the Collegedale, Tenn., maker of Little Debbie as the lead bidder to buy its Drake's cakes.
According to a filing in U.S. bankruptcy court, McKee Foods Corp. has offered $27.5 million in cash for the cake brands, which include Devil Dogs, Funny Bones and Yodels, The Associated Press said. The fate of Twinkies and other Hostess cakes are still being negotiated with other bidders.
The "stalking horse" bid by McKee would set the floor for an auction process that lets competitors make better offers. A judge would have to approve the final sale.
McKee Foods makes a variety of snack cakes under the Little Debbie banner that compete with Hostess cakes at a lower price. For example, its Cloud Cakes resemble Twinkies and its Devil Cremes resemble Devil Dogs.
McKee generates about $1.1 billion in sales a year, with its Little Debbie cake division accounting for $800 million of that, according to the company.