CADBURY, the maker of some of Britain’s best-loved confectionery brands, yesterday rejected a £10.2bn takeover approach from Kraft Foods, sparking speculation that the US food giant and its rivals may soon enter a spiralling bidding war for the firm.<br /><br />Kraft Foods, which owns confectionery brands Toblerone, Milka and Oreo, said a deal would create a “global powerhouse” in snacks and confectionery, with a combined $50bn (£30.6bn) in revenues.<br /><br />It offered 745p a share for Dairy Milk and Creme Egg maker Cadbury, made up of 300p cash and 0.2589 new Kraft shares. But Cadbury said that the bid fundamentally undervalued the group, adding: “The board is confident in Cadbury’s standalone strategy and growth prospects.”<br /><br />City analysts have been anticipating a move on Cadbury since last year, when chocolate giant Mars created the world’s largest confectionery group by snapping up gum specialist Wrigley for $23bn. They were quick yesterday to jump on the prospect of another bidder emerging to challenge Kraft, with several floating the possibility that Nestlé and Hershey might join forces to table an offer.<br /><br />“We think that there is a possibility of a combination of Hershey and Nestlé being stirred to combine with a counter bid,” said Barclays Wealth analyst William Hobbs. “Nestlé would take the gum operations and Hershey would take the chocolate.”<br /><br />“A key question is whether there is a counter bid, most likely from a Nestlé-led consortium,” agreed Panmure Gordon analyst Graham Jones.<br /><br />Nestlé declined to comment on whether it will launch a counter-bid, though the group’s chief executive Paul Bulcke said: “We are always open for opportunities but we have no plans for any major acquisitions in 2009 and 2010.” <br /><br />Hershey also declined to comment.<br /><br />Kraft was unwilling to commit itself yesterday to the possibility of upping its offer, though chairman and chief executive Irene Rosenfeld said the firm hopes “to engage with the board of Cadbury on a constructive basis with the goal of consummating a recommended transaction”.<br /><br />Analysts suggested Kraft would need to offer a substantial premium to its initial offer in order to secure the support of the Cadbury board.<br /><br />“We believe that Kraft will need to up its offer to have any serious chance of success, perhaps to 800p in cash or higher,” said Keith Bowman, equity analyst at Hargreaves Lansdown.<br /><br />“This is a credible offer for Cadbury, but somewhat short of a knockout blow,” added Investec Securities analyst Martin Deboo.<br /><br />The market has already priced in a further bid, with Cadbury shares closing up 215p – or 37.85 per cent – yesterday at 783p.<br /><br />Kraft is keen to exploit synergies between the two businesses, merging Cadbury’s high-profile gum business,?Trident, and exposure to the emerging markets with its own strength in the Latin American and European chocolate market.<br /><br />“We are eager to build upon Cadbury’s iconic brands and strong British heritage through increased investment and innovation,” added Rosenfeld.<br /><br />She also played a strong political card by suggesting that any deal would make the UK “a net beneficiary in terms of jobs”. Kraft is eager to continue to operate the Somerdale facility, which Cadbury plans to close, and also plans to preserve manufacturing jobs by investing in Bournville.