UK Bakery Operations Launches Precautionary Investigation

Canada Bread Company, Limited announced that it is launching an investigation into allegations that a senior executive of its UK bakery operations may have sought to influence pricing of a competitor, Mr. Bagel Ltd.

08/12/08 Canada Bread Company, Limited announced that it is launching an investigation into allegations that a senior executive of its UK bakery operations may have sought to influence pricing of a competitor, Mr. Bagel Ltd.

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

Canada Bread entered into negotiations to acquire Mr. Bagel in October and the main terms of the transaction had been agreed upon in principle. Consistent with normal acquisitions process, the Company had received detailed information from Mr. Bagel under the terms of a confidentiality agreement and was involved in intensive due diligence which appears to have 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 to the Office of Fair Trading in the United Kingdom.

As a precautionary measure, Canada Bread has immediately launched a full investigation into these unproven allegations, with the guidance and support of external legal counsel. To ensure the independence of this process, the Managing Director of the UK bakery operations has been suspended pending the conclusion of the investigation.