Cadbury hits new high as bidders circle

By David Jones

LONDON (Reuters) - Speculation about a bid battle for Cadbury (CBRY.L: Quote, Profile, Research) among Kraft Foods and other rivals lifted shares in the British confectioner to a new high on Monday but analysts doubt whether a competing bid will emerge.

Most of the other big players in the global confectionery industry -- U.S.-based Hershey Co, Italy's Ferrero and Switzerland's Nestle AG -- are now weighing bids themselves, according to Reuters sources and media reports.

Many analysts doubt whether any of these three would bid alone, but possible combinations of them could trump Kraft's current cash and shares bid of 9.9 billion pounds ($16.4 billion) or push the American food giant Kraft to raise its offer.

Italy's Ferrero family is united in its decision to look at options for British confectioner Cadbury, a source close to the family told Reuters, despite newspaper reports of a potentially deal-breaking division among the family.

Kraft made its bid for Cadbury earlier this month and values the company at around 727 pence. The U.S. maker of Milka and Toblerone chocolates may raise its bid if rival bidders emerge, said a source familiar with the situation late on Sunday.

"We still believe Kraft is in the driving seat and it will increase the cash component of its bid to 4 pounds, bringing its offer up to 8.26 pounds," said analyst Jon Cox at Kepler Capital Markets. Kraft's current bid consists of 300 pence of cash and the rest in new Kraft shares for each Cadbury share.

He is unconvinced about Hershey's ability to fund a bid and even a combined deal with Ferrero would be hard pressed to get the finance.

Although Nestle can easily raise the cash, it would have big anti-trust obstacles especially in the UK, he added.