Mexican bakery giant Grupo Bimbo SAB announced Wednesday it has signed an agreement to buy the US subsidiary of Canada's George Weston Ltd. for $2.4 billion, a deal that would make it one of the world's largest baked foods companies. Weston Foods Inc. makes breads and pastries under brands including Entenmann's, Freihofer's, Stroehmann and Thomas'. It has 22 plants and more than 4,000 distribution routes, concentrated largely on the east coast of the US.

Bimbo has spent more than $200 million this year buying companies in Latin America and China to cut its dependence on Mexico. The company became the largest bread maker in Brazil earlier this year after buying 75 per cent of Nutrella Alimentos SA, and CEO Daniel Servitje has said he aims to create the world's largest bread maker within two years. Bimbo currently has 80 plants, 800 distribution centers and 36,500 distribution routes in 18 countries.

''This is the most important transaction in the history of Grupo Bimbo, and one of the largest in the history of baking,'' Servitje said yesterday in the statement.

Mexico accounted for 67 per cent of Grupo Bimbo's third- quarter sales of 19.03 billion pesos ($1.4 billion), and the US brought in 22 percent. The company makes Tia Rosa tortillas, Entenmann's cakes, Pan Bimbo, Mrs. Baird's breads and Boboli pizza ingredients. Bimbo said it expects the deal to generate $95 million of savings by the fifth year.

Sales may rise 35 percent to $10 billion, and US revenue may more than triple to $3.9 billion, Servitje said. The company does not plan any other acquisitions in the next two years, said CFO Guillermo Quiroz.

Six banks will finance $2.3 billion of the purchase price, with $600 million in a one-year bridge loan and further credits that would come due in three to five years. The deal has been approved by the boards of both companies, and is only awaiting approval by Bimbo shareholders and regulatory authorities. Bimbo expects the deal to be concluded by the first quarter of 2009.

Servitje said the baking industry isn't affected as severely as others by recessions. "Sales volumes don't fall in the bread industry the way they do in the auto or housing industry," Servitje told a news conference.

Weston will retain its other North American bakery units, including Interbake Foods, a maker of biscuits, cookies and ice- cream cones. George Weston said it would use the cash from its divestitures ''wisely and at the appropriate time.'' Bimbo said last week that it was in talks with Weston.

Weston decided to sell assets where it didn't have a top position in a market or had the potential to attain that spot amid concern over the deteriorating economy in the past year, Chairman W Galen Weston said on a call with analysts.

The company hasn't yet decided how it will use the approximately C$5 billion ($3.97 billion) in cash it will have after the deal closes, he said. Weston said he sees a ''major consolidation play'' in the frozen baked-goods business as well as opportunities in supermarkets.

''Over the next 18 months, economic uncertainty could lead to great buying opportunities,'' Weston said. ''Under such circumstances, cash will be more than king.''

Weston rose C$1.48, or 2.4 per cent, to C$62.40 on the Toronto Stock Exchange yesterday. The shares are up 15 per cent this year. Grupo Bimbo fell 2.07 pesos, or 3.4 per cent, to 59 pesos in Mexico City. The shares are down 9.3 per cent this year.

Moody's Investor Services placed its ratings of Bimbo debt under review for a possible downgrade, saying the deal would significantly alter the company's debt profile and raise its exposure to the highly competitive US baked-goods market.