Mexican bakery giant Grupo Bimbo has reached an agreement to buy Saputo's bakery business for C$120m.

Bimbo, which earlier this year acquired Canadian bakery group Canada Bread from Maple Leaf Foods, described the Saputo operations as "the leading producer of snacks cakes" in the country. 

"This operation will position Canada Bread for further growth in the country, complementing its current product portfolio and its distribution and manufacturing footprint," Bimbo said.

The Saputo bakery operations, which include brands like Vachon and May West, is expected to generate annual sales of more than C$130m (US$112.2m), Bimbo said. It has a production facility in Quebec and also sells into the US.

Dairy group Saputo said its bakery business accounted for less than 2% of its sales in its 2013/14 financial year. It added the transaction, subject to the approval of Canada's competition authorities, is expected to be finalised in February.