Hubbard to sell cereal company

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Former Auckland mayor Dick Hubbard is testing the market for Hubbard Foods, the cereal business he owns and founded 20 years ago.

Merchant banking firm Cranleigh is understood to be running a sales process on behalf of Hubbard.

Potential bidders are believed to include Weet-Bix maker Sanitarium, the Pacific Equity Partners-owned biscuit maker Griffins Foods, Australasian food group Goodman Fielder and the New York Stock Exchange-listed Kellogg Company, which had 2007 sales of $US11 billion ($14.4b).

Hubbard's attempt to sell comes as the cost of the group's ingredients, such as rice, wheat, corn and oats, soars due to a global food crisis that has so far spawned dramatic price rises, riots and a United Nations conference in Rome.

Market sources suggest, if sold, Hubbard Foods could fetch between $30 million and $40m.

Hubbard, who lost the Auckland City mayorship to John Banks in October, declined to say why he had put his business on the block. "I wouldn't make any comment at this stage," he said.

The group's last annual report for the year to March 2007 points to net profit before tax of $1.5m, up from $1m in 2006, and a 16.9% return on shareholders funds. The report outlines a target of $2.9m pre-tax profit by 2010.

Chief executive Doug Paulin notes in the report that the past four years proved difficult with both competition and operating costs increasing.

Founded in a small Onehunga factory in 1988, Hubbard Foods was originally named Winner Foods. It began life producing three breakfast cereals under the Winner brand, introducing the Hubbard brand in 1990. A name change to Hubbard Foods followed in 1991, with the firm moving to purpose-built premises in Mangere in 1994. The company now has about 125 staff.

Noted for its social and environmental concerns, Hubbard Foods was the first private New Zealand company to release a triple bottom line annual report in 2001 including economic, environmental and social factors.

Like Hubbard Foods, Sanitarium touts itself as proudly Kiwi-owned and operated. It was established by Edward Halsey, a Seventh-day Adventist, in 1900. Griffins has proved acquisitive by buying the snack food business Nice & Natural from Allen and Barbara Peters last year for an undisclosed sum.

Gareth Vaughan is editor of specialist business news website businessday.co.nz