Letterkenny's Highland Bakery is lining up to buy the troubled O'Donnell's Bakery which ceased trading before Christmas.
Directors of O'Donnell's bakery have called a meeting of creditors for next Monday when a liquidator will be appointed.
O'Donnells employs 15 staff and some of them have been re-deployed to work at the Highland Bakery.
The Laghey-based bakery ceased trading on Christmas Eve and Highland has taken over the O'Donnell's brand since January 4th.
A spokesman for the Letterkenny bakery refused to comment on the proposed takeover, but it is understood the company is in the process of carrying out a full takeover of O'Donnell's Bakery.
A spokesman for O'Donnell's made a brief statement on the situation at the troubled bakery: "Due to the current financial position of the company, the directors have decided to call a creditors' meeting for this Monday, January 17th, when a liquidator will be appointed. We will issue a statement following that meeting." He added that the board of directors were doing their best to save jobs. "There are several interested parties and our main priority is to safeguard jobs."
A Letterkenny-based liquidator is understood to be waiting in the wings to step in when the liquidation process begins.
O'Donnell's Bakery was founded in Ballyshannon in 1969 and moved to a new purpose-built facility in Laghey in 2005 after brothers Charlie and Eamonn took over the operation from their father and uncles.
The company bakes 50 different bread products, sending more than 5,500 units each day to stores across the country. The bakery supplies major retailers including Centra, SuperValu, Spar, Mace, Londis, and Aldi as well as hotels and restaurants.
Last July O'Donnell's Bakery was awarded a UK Great Taste Award for its hand-made wheaten bread and the company said it was increasing production as a result.
Highland Bakery was set up in 2000 under the ownership of Letterkenny businessman, Kevin Bradley and supplies shops locally and around the country.