The supplier looks set to splash the cash on Jammie Dodgers manufacturer Burton's Foods, which has been put up for sale by American owner HM Capital for about £200m.
Last month Northern Foods' former chief executive Pat O'Driscoll said the company was keen to acquire businesses after raising £203m from the disposal of several arms.
Now the company has emerged as one of what is believed to be four companies bidding for Burton's.
"There is a lot of private equity money around at the moment, but in this type of situation you would expect a trade player to buy it because they would have the synergies private equity doesn't," said one industry insider. "There may be an attraction in terms of Burton's management as Northern is short of biscuit management."
But Clive Black at Shore Capital said he was not convinced that buying Burton's would be a good move because the biscuit market was challenging. "I would be cautious if Northern decided to get too heavily involved," he said. "Fox's hasn't been performing too well and lost share over the past year, which Northern worked to stabilise."