CADBURY, the maker of some of Britain&rsquo;s best-loved confectionery brands, yesterday rejected a &pound;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 &ldquo;global powerhouse&rdquo; in snacks and confectionery, with a combined $50bn (&pound;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: &ldquo;The board is confident in Cadbury&rsquo;s standalone strategy and growth prospects.&rdquo;<br /><br />City analysts have been anticipating a move on Cadbury since last year, when chocolate giant Mars created the world&rsquo;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 Nestl&eacute; and Hershey might join forces to table an offer.<br /><br />&ldquo;We think that there is a possibility of a combination of Hershey and Nestl&eacute; being stirred to combine with a counter bid,&rdquo; said Barclays Wealth analyst William Hobbs. &ldquo;Nestl&eacute; would take the gum operations and Hershey would take the chocolate.&rdquo;<br /><br />&ldquo;A key question is whether there is a counter bid, most likely from a Nestl&eacute;-led consortium,&rdquo; agreed Panmure Gordon analyst Graham Jones.<br /><br />Nestl&eacute; declined to comment on whether it will launch a counter-bid, though the group&rsquo;s chief executive Paul Bulcke said: &ldquo;We are always open for opportunities but we have no plans for any major acquisitions in 2009 and 2010.&rdquo; <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 &ldquo;to engage with the board of Cadbury on a constructive basis with the goal of consummating a recommended transaction&rdquo;.<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 />&ldquo;We believe that Kraft will need to up its offer to have any serious chance of success, perhaps to 800p in cash or higher,&rdquo; said Keith Bowman, equity analyst at Hargreaves Lansdown.<br /><br />&ldquo;This is a credible offer for Cadbury, but somewhat short of a knockout blow,&rdquo; added Investec Securities analyst Martin Deboo.<br /><br />The market has already priced in a further bid, with Cadbury shares closing up 215p &ndash; or 37.85 per cent &ndash; yesterday at 783p.<br /><br />Kraft is keen to exploit synergies between the two businesses, merging Cadbury&rsquo;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 />&ldquo;We are eager to build upon Cadbury&rsquo;s iconic brands and strong British heritage through increased investment and innovation,&rdquo; added Rosenfeld.<br /><br />She also played a strong political card by suggesting that any deal would make the UK &ldquo;a net beneficiary in terms of jobs&rdquo;. 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.