Toronto-based Maple Leaf said it has recently completed a comprehensive review of opportunities to accelerate profitable growth across its bakery business. But before committing resources, it decided to explore strategic alternatives, including a sale of its 90 percent stake in Canada Bread.

"This is about a great business with a good view to help it to grow profitably over the next four or five years, but because we're at a crossroads ... we felt it was prudent to consider the alternatives," Maple Leaf Chief Executive Michael McCain said in an interview.

Maple Leaf's shares jumped 10 percent to C$14.63 by mid-afternoon on the Toronto Stock Exchange, while those of Canada Bread rose 6.4 percent to C$65.15.

In the event of a sale of the business, Maple Leaf said it would consider using the proceeds to pay down debt, reinvest in its business and return capital to shareholders.

The potential sale of its Canada Bread interest, following a deal in August to sell its rendering business, does not signal that Maple Leaf itself is for sale, McCain said.

Maple Leaf has the choice to operate an integrated business that includes the bakery, or become a protein-focused company, McCain said.

In response to an analyst's question on a conference call about whether Maple Leaf is signaling it is for sale, he said "the answer ... is a very unequivocal 'no.'"

The company cautioned that there could be no assurance that a sale of the business will occur. Maple Leaf expects to conclude the strategic alternatives process in early 2014.

In a separate statement, Canada Bread said it has appointed a special committee comprised of its independent directors to ensure that all of its shareholders are treated fairly and that the company's interests are taken into account.

Canada Bread, which has a market capitalization of roughly C$1.66 billion ($1.61 billion), employs some 6,400 people in operations spread across Canada, the United States and Britain.

It is one of two dominant Canadian bakers, along with food producer George Weston Ltd, parent of the Loblaw Cos Ltd grocery chain. To find a strategic buyer, Maple Leaf would likely have to go outside Canada to avoid competition concerns, McCain said, but he also noted possible interest from private equity buyers in Canada and elsewhere.

For a foreign investor to buy Canada Bread, approval by the Canadian government would be necessary.

Under the Investment Canada Act, the federal government has powers to veto any foreign takeover of a Canadian asset or company worth at least C$344 million if it deems such a deal would not bring a "net benefit" to the country.

Canada Bread, in addition to bread sold under the Dempsters brand, sells pasta and other products under banners such as Olivieri, Ben's, POM and Sunmaid.

McCain has in recent years highlighted a consumer move away from eating bread, driven by some popular diets, but said Monday that such trends were not behind Maple Leaf's possible exit of the bakery business. In fact, if the company holds onto its Canada Bread stake, it is confident that through organic growth and cost-cutting it can capitalize on new opportunities.

McCain said he was not under pressure from investors, which include activist hedge fund West Face Capital, to look at a sale.

Thomas Dea, a partner in West Face Capital, Maple Leaf's second-largest shareholder after McCain, declined to comment.

Canada Bread, which recently opened a new bakery at Hamilton, Ontario, had sales of nearly C$1.6 billion in 2012. Those sales were the lowest in five years, although its net earnings last year of C$71 million were the highest in three years, according to the company's website.

Analyst Robert Gibson of Octagon Capital Corporation said it would make more sense for Maple Leaf to reduce its Canada Bread stake rather than sell it outright, but Maple Leaf Chief Financial Officer Mike Vels said the company is looking to sell all or none of its shares.

In August, Maple Leaf agreed to sell its profitable rendering and biodiesel business, Rothsay, to Darling International Inc for about C$645 million in cash.

Maple Leaf also said Monday it has engaged CIBC World Markets Inc to act as its financial adviser.

($1 = 1.0283 Canadian dollars)

(Reporting by Euan Rocha in Toronto and Sneha Banerjee in Bangalore; Editing by Kirti Pandey, Maureen Bavdek and Richard Chang)

By Euan Rocha and Rod Nickel