Australian bakery group KH Foods has agreed to sell its grocery cake business to rival George Weston Foods, a subsidiary of UK-based Associated British Foods.

KH Foods said this morning (14 August) that it has struck a "binding agreement" to sell its operations in Adelaide and Perth to George Weston.

KH Foods said it expects the sale to formally go through later this month. The company added it would use the proceeds to pay off part of its debts.