TORONTO, Feb 12 (Reuters) - Mexico's Grupo Bimbo will buy Canada Bread Company for C$1.83 billion ($1.66 billion) in cash, allowing the Canadian company's parent Maple Leaf Foods to focus on its meat products business, Canada Bread said on Wednesday.
Grupo Bimbo, one of the world's largest bread makers, will pay C$72 a share for each share of Canada Bread, a 7 percent premium to the Canadian company's closing price on the Toronto Stock Exchange on Tuesday.
The purchase builds on Grupo Bimbo's large U.S. acquisitions in recent years and strengthens its position as a top breadmaker in North America.
Bimbo has expanded its footprint in recent years, acquiring Sara Lee Corp's North American bakery business for $959 million in 2010 and buying Hostess Brands' Beefsteak bread in 2013.
Shares of Canada Bread rose 7 percent in light morning trading, with the stock having surged 22 percent since October, when food processor Maple Leaf said it was mulling the sale of its 90 percent stake in the company. Maple Leaf rose 1.6 percent to C$16.10 on the Toronto Stock Exchange.
In January, Reuters reported that Grupo Bimbo was the top candidate to buy Canada Bread, after other parties - including private equity firms KKR & Co and Bain Capital LLC, and U.S.-based Flowers Foods Inc - bowed out of the race.
This is Bimbo's biggest purchase since it bought Sara Lee's North American bread business. The family-owned and operated breadmaker said it will finance the purchase with cash and by using long-term credit lines that it already has in place.
Canada Bread is one of two dominant Canadian bakers, along with food producer George Weston Ltd, parent of the Loblaw Cos Ltd grocery chain. In addition to bread sold under the Dempsters brand, Canada Bread sells other products under banners such as Ben's, POM and Sunmaid.
Canada Bread shares were up 7.3 percent to C$72.15 in morning trading. Shares of Grupo Bimbo slipped 0.63 percent to 34.95 pesos in Mexico trading.
Maple Leaf has been selling parts of its businesses in an attempt to restructure under a multi-year plan. It has recently been upgrading its meat operations as it seeks to boost profits and better compete with rivals in the United States.
Last August, Maple Leaf sold its rendering business Rothsay, to Darling International Inc for C$645 million. And late last year, Canada Bread also said it would sell its fresh pasta business, Olivieri, to Spain's Ebro Foods SA for C$120 million.
In December, following the sale of Olivieri, Canada Bread announced a special dividend of $8 per share, netting Maple Leaf a roughly C$183 million windfall given its stake in the company.
Maple Leaf was advised by RBC Capital Markets and Centerview Partners LLC on the Canada Bread sale, while its subsidiary had engaged CIBC World Markets Inc to act as its financial adviser.
Bimbo said in a separate statement that they were advised by boutique firm Atlas Advisors, with legal advice from Torys.
The deal has been approved by the boards of both Grupo Bimbo and Canada Bread, and Maple Leaf has agreed to vote the shares it controls in favor of the deal.
The transaction still awaits regulatory anti-trust and foreign investment regulatory approvals.
Bimbo was founded in Mexico City back in 1945 by Lorenzo Servitje. Its current Chief Executive Daniel Servitje is a descendant of the founder and the Servitje families own about 50 percent of the company's stock.