Speculation about a bid battle for Cadbury
Most of the other big players in the global confectionery industry -- U.S.-based Hershey Co
Many analysts doubt whether either 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 into a higher offer.
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 is made up to 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.
We think the probability of a competitive auction for Cadbury has increased, said analyst Martin Deboo at brokers Investec Securities.
With the chance of competition rising, Cadbury's shares rose over 2 percent to a high of 819-1/2 pence before last trading up 1.5 percent at 812-1/2 at 9:30 a.m. EST (1530 GMT), or nearly 12 percent above Kraft's current bid at 727 pence.
We are not convinced that Nestle would launch a bid for all of Cadbury's assets as this would create anti-trust problems in certain chocolate markets include the UK, said analyst Orianne Segaud at brokers Natixis Securities.
Nestle gained a sizeable share of the British chocolate market when it took over Rowntree in 1988 and putting it together with Cadbury would likely alert UK regulators.
For a graphic on the companies involved please click on: http://graphics.thomsonreuters.com/119/EZ_CKHN1109.gif
Acquiring Cadbury would be an impossible task for Hershey alone but might be more manageable in the context of other interested parties, said analyst Jeremy Batstone-Carr at brokers Charles Stanley.
He said Nestle might be encouraged to make a joint offer for Cadbury in part based upon the fact that Hershey holds the lucrative license to distribute its own Kitkat product in the United States and a deal with Hershey could see that return.
Investec's Deboo said with the growing possibility of a competitive auction for Cadbury, he is raising his target price for Cadbury shares to 810 pence from 785 and is raising his estimate of Kraft's takeover value of Cadbury to 820 pence from 800, while he still sees a standalone fair value for Cadbury at 750 pence.
Kraft has until December 7 to publish its official offer document and post it to Cadbury shareholders, which will then trigger a 60-day takeover timetable under UK rules.
Kraft shares were 0.9 percent higher at $27.40, Hershey up 0.1 percent at $36.93, while Nestle shares rose 1.1 percent to 48.3 Swiss francs.
(Editing by David Cowell)