PILLSBURY AGREES TO BUY HEINZ BAKERY DIVISION

BRIAN DUNN

MARKHAM, Ontario (FNS) -- Pillsbury Co., based in Minneapolis, has agreed to acquire the North American bakery division of H.J. Heinz Co., which would add frozen unbaked bagels and bread dough to Pillsbury's current line of products.

The division here, for which Pillsbury would pay about $178 million U.S., would add about $200 million annually to the company's own bakeries and food-service unit, which generate more than $1 billion in annual sales across North America.

The Heinz bakery division consists of six plants in the United States and three in Canada, employing a total of 1,100 workers. Pillsbury operates one facility in Canada: a refrigerated dough plant in Ontario.

Pillsbury spokesman Terry Thompson said the company has not decided what effect the acquisition would have on the individual Heinz plants it is acquiring. He said the acquisition of Heinz's bakery division complements Pillsbury's existing food-service operations.

"We were absent or vulnerable in two key areas -- frozen bread and frozen bagels -- and Heinz has a large customer base in this area in both the U.S. and Canada," Thompson said.

With more and more people eating away from home, Thompson said, the category offers a lot of promise for future growth. Heinz said although the bakery division had performed well over the past few years, it was being sold because it did not represent one of its eight core operations.

"The division sells frozen-dough products to a number of chains like Subway and Dunkin' Donuts as well as to supermarket in-store bakeries," explained Heinz spokeswoman Debbie Foster from the company's Pittsburgh head office. "But we decided to sell it, because it was the only bakery operation throughout our worldwide operations."

The sale is subject to regulatory approval.