The Canada Bread Company has launched an investigation into allegations that a senior executive of its UK bakery operations has attempted to influence pricing of a competitor, Mr Bagel.

Canada Bread entered into negotiations to acquire Mr Bagel in October and the main terms of the transaction had been agreed upon in principle.

The company received information from Mr Bagel under the terms of a confidentiality agreement and was involved in due diligence which extended to the discussion of pricing strategies to be implemented after the acquisition.

Negotiations ceased in early December when Mr Bagel sought to "significantly" raise the selling price of the business late in the process. The managing director of Mr Bagel has now made allegations about alleged price fixing to the press and the Office of Fair Trading in the UK.

"We have been operating under the premise that we were in the late stages of acquiring this business," said Richard Lan, president and CEO of Canada Bread. "While these allegations are unproven they are serious, and we are taking all precautionary steps to fully investigate this matter and determine the facts."

The managing director of Canada Bread's UK bakery operations has been suspended pending the conclusion of the investigation.

Canada Bread Company, which is 89.8% owned by Maple Leaf Foods, is a manufacturer and distributor of bakery products, frozen par-baked products and fresh pasta and sauces.