Hostess is set to announce that it has picked the maker of Little Debbie as the lead bidder to buy its Drake's cakes, according to a source close to the situation.
The source says Hostess is set to announce Monday that rival McKee Foods is the stalking horse bidder for the cakes, which include Devil Dogs, Funny Bones and Yodels. The fate of Twinkies and other Hostess cakes are still being negotiated.
The bid by McKee will set off an auction process that lets competitors make better offers.
McKee Foods makes a variety of snack cakes under the Little Debbie banner that compete with Hostess cakes. For example, its Cloud Cakes resemble Twinkies and its Devil Cremes resemble Devil Dogs.