By Lauren Hirsch and Siddharth Cavale

(Reuters) - Hostess Brands LLC, the maker of Twinkies and Ding Dongs, said on Tuesday it will be bought in a $725 million deal by an affiliate of private equity company Gores Group, which will then take it public.

The Kansas City, Missouri-based snack cake company, which was founded in 1919, will be acquired by Gores Holdings Inc <GRSH.O>, a special purpose acquisition company (SPAC). Including debt, the total value of the deal is about $2.3 billion, Hostess said.

The company's products, especially the golden, cream-filled Twinkies cakes, are ingrained in American pop culture and have long been packed in children's lunch boxes.

SPACs such as Gores Holdings have no assets but use their IPO proceeds, together with bank financing, to take companies public through acquisitions. The Hostess acquisition is expected to close by end of summer and Gores will then change its name to Hostess Brands Inc.

Hostess sold itself in 2013 to private equity firm Apollo Global Management LLC <APO.N> and consumer industry investor C. Dean Metropoulos for $410 million.

Apollo and C. Dean Metropoulos will receive shares in the combined company worth an ownership stake of about 42 percent. Gores Holdings will pay Hostess $725 million in cash. About $173 million will be used to pay down debt.

Other investors, including Gores Group Chief Executive Alec Gores and Metropoulos, have committed $350 million through a private placement.

Metropoulos will remain executive chairman of Hostess, and William Toler will continue as chief executive.

Under Apollo and Metropoulos, Hostess relaunched its brands and regained market share, focusing on distribution channels where it had historically lacked a significant presence, such as dollar stores and vending machines.

Reuters reported last July that Hostess was exploring a sale that could value it at more than $1.7 billion, including debt. The company scrapped plans for a sale in favor of an initial public offering, after it failed to attract sufficient buyer interest at the desired price.

"We have evaluated a number of potential acquisitions for Gores Holdings and believe this transaction offers a superior option for our stockholders," CEO Alex Gores said in a statement.

Deutsche Bank Securities Inc, Moelis & Co and Morgan Stanley were financial advisers to Gores Holdings, while Weil, Gotshal & Manges LLP was the legal adviser.

Rothschild & Co, Credit Suisse and Perella Weinberg Partners were M&A advisers to Hostess. Morgan, Lewis & Bockius was legal adviser to Apollo.

(Reporting by Lauren Hirsch in New York and Siddharth Cavale and Sruthi Ramakrishnan in Bengaluru; Editing by Saumyadeb Chakrabarty and Matthew Lewis)