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The Fight to Buy Hostess: Main Street vs. Wall Street

Hostess Twinkies
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Hostess Twinkies

Of the two thousand Hostess Brands documents filed in the last year with the U.S. Bankruptcy Court, it's one of the most recent ones — a handwritten, five-page letter on loose-leaf notebook paper — that stands out the most.

In document #1890, Don Sheridan of Wellesley, Mass., writes to say the Judge, the CEO, and the company's advisers should allow him to prepare a proposal for the Twinkie maker and its 30 brands.

Financial advisers to Hostess have set a deadline of Monday, Dec. 10, to submit initial interest in acquiring a liquidating Hostess or any number of its brands. Compared to the likes of the conglomerate snackmakers that will table billion-dollar bids, Sheridan would hardly seem a viable competitor. He is 59 years old, battling cerebral palsy and living on welfare. His academic qualifications are slim: He flunked out of accounting school at a younger age and, in conversations over the phone, describes himself as being "unemployed practically [his] whole life."

Despite the odds, Sheridan's is a very real dream.

And he's not alone. A mainstay of the collective American memory, the idea that Hostess — Twinkies, Wonder Bread and all — could go stale has struck a chord with consumers and collectors. It's drawn a singularly unique set of strangers to the world of wonky financial engineering, court hearings, and fire sales normally inhabited only by Wall Street pocket squares and white-shoe law firms.

(Read More: At Hostess, Everything's for Sale but the Kitchen Sink )

Enter the Hurst brothers. Twins Austin and Zach, 26, run a small private equity fund in Sarasota, Fla., and have a track record of small investments in early-stage tech companies. Their fund is small and run remotely, their experience working with large companies is nonexistent — but they're gunning to take over the national baker, with big expectations.

"I honestly believe we can double the profitability," said Austin Hurst, the firm's managing general partner, reached by phone before the deadline. Hurst said the brothers, still working on a bid to submit to Hostess' bankers, were feverishly searching for wealthier — and more knowledgeable — investors to provide financial backing.

Cobbling together investors has been a familiar approach for would-be saviors of these iconic brands. In 2011, everyday consumers pledged more than $200 million to save hipster beer-maker Pabst Blue Ribbon Co. through BuyABeerCompany.Com, a crowdfunding website.

In a similar vein, Spencer Clark, CEO of eRaise, a nascent crowdfunding platform still in beta testing, launched the website DoughForHostess to solicit financial pledges from small-time investors who wanted to "save" the company. In roughly two weeks' time, the site received "thousands of responses from around the world," according to Clark — totaling some $2 million in unofficial financial commitments. While Clark does not have the outright intention of bidding for the company (although there is a scenario, albeit a phenomenally slim one, where he'd take a shot at it), he does see a future where these kinds of main-street financed deals are very possible.

The Pabst effort, while valiant, got quashed. In June 2011, the Securities and Exchange Commission shut down two rogue investors who were soliciting the public for the funds, but did not register the securities. The site was shut down following a cease-and-desist order, and the brand was scooped up by family-owned private equity shop C. Dean Metropoulos & Co. for $250 million.

(Read More: The Twinkie Factor: Planned Job Cuts Rise )

Coincidentally, the Metropoulos family could save Hostess, too. The owner and principal Daren Metropoulos (also now chairman and CEO of Pabst) told CNBC the effort was "at the beginning stage of our due diligence."

In all likelihood, buying Hostess Brands would cost a multiple of Pabst. A representative for financial adviser Perella Weinberg — tasked with selling the piecemeal brands — said in a hearing that the sales could fetch roughly half of the brands' combined $2.4 billion in revenues.

The other, more established, bidders are likely to include large corporations backed by large commitments of capital by large investment banks. (Perella said at least six banks were retained.)

National competitor Flowers Foods recently expanded its credit facility in order to tap its cash reserves, signaling to analysts it plans to bid. Behind the scenes, executives from supermarkets and regional bakeries have been touring Hostess facilities and talking with management.

That's not stopping those like Sheridan and Hurst from racing to the finish line.

"Our exact bid has yet to be determined … but it will be sizeable and it will be very competitive," Hurst said. "We're in it to win it."

(Read More: 15 Major Fast Food Failures)

By CNBC's Kayla Tausche; Follow her on Twitter: @KaylaTausche and CNBC's Jesse Bergman; Follow him on Twitter @JBergman

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