Kingsmill owner Associated British Foods Plc said on Friday that it has agreed to buy Hovis Group from private equity firm Endless for an undisclosed sum.
In its interim results, the company said it had been evaluating a range of strategic options for its UK bakery business, Allied Bakeries, at which profitability has been "increasingly challenged" in recent years by a decline in demand for pre-sliced, packaged bread.
ABF said on Friday that the deal will combine the production and distribution activities of the two businesses, "driving significant costs synergies and efficiencies, to create a profitable UK bread business that is sustainable over the long term".
"The combined business will be better placed to compete effectively and to establish a stable platform for product innovation in the segments of the UK bakery category that are growing as a result of changing consumer tastes and needs," ABF said.
This will include improvement in existing products and expansion into new product ranges.
Chief executive George Weston said: "This transaction will create a UK bakeries business that is both profitable and sustainable over the long term. Supporting the Hovis and Kingsmill brands with well-invested and efficient operations will also enable innovation and growth.
"This solution will create value for shareholders, provide greater choice for consumers and increase efficiencies for customers."
ABF did not disclose any financial details, but Sky News has suggested a price tag of around £75m.