Kraft Foods Inc has until November 9 to make an offer for British confectioner Cadbury Plc or must walk away for six months, Britain's Takeover Panel said on Wednesday.

The world's second-largest confectionery group, maker of Dairy Milk chocolate, Creme Eggs and Wispa bars, three weeks ago rejected a cash and shares approach from North America's biggest food group, initially worth 745 pence per Cadbury share, or 10.2 billion pounds ($16.3 billion).

Kraft, whose brands include Milka chocolate and Oreo biscuits, said it noted the Panel's decision and understood the implications, while Cadbury repeated its rejection of Kraft's approach.

Cadbury has a strong position in the global confectionery market and the board is confident in Cadbury's standalone ... strategy and growth prospects, Chairman Roger Carr said in a statement following the Panel's announcement.

However, major Cadbury investors are worried Chief Executive Todd Stitzer may overplay his hand in fending off Kraft, with no obvious rival in sight to spark a bidding war.

Stitzer was last week reported to have said he saw some sense in a Kraft deal, but argued previous deals in the sector had been made at higher multiples than implied by Kraft's offer. Stitzer subsequently said he did not believe the bid made strategic or financial sense.

Cadbury shares were flat at 800 pence by 1425 GMT, while Kraft was 0.1 percent lower at 17.70 euros in Frankfurt and 0.8 percent down at $25.80 in New York.

Bankers say Kraft's dilemma is where to pitch a formal bid in the hope it can win a recommendation from Cadbury's board and gain access to the company's books.

Some analysts have said there is compelling logic to a potential deal adding Cadbury's high-growth emerging market business into Kraft's wide-ranging distribution system, with few overlaps which might prompt competition concerns.


Credit Suisse estimated Kraft's proposal was worth about 12.5 times Cadbury's 2009 earnings before interest, tax, depreciation and amortization (EBITDA), but some analysts believe an offer closer to 14 times 2009 EBITDA -- or about 850 pence -- could lead to an agreed deal.

We think Kraft will come in with an offer starting with an '8' so maybe (it will make a bid) at around 850 pence plus or minus a few pennies, said analyst Clive Black at brokerage Shore Capital. We're not convinced that in the absence of clear evidence of a counter bid that we're looking at something beginning with a '9' or a '10'.

Analysts believe what Kraft would have to pay for Cadbury ultimately depends on whether a counter bidder enters the fray, with a Nestle AG and Hershey Co the most talked-about potential contenders.

It's probably worth Kraft hanging on as long as they can to see how things develop in terms of other bidders coming in, said analyst Graham Jones at brokerage Panmure, who saw a Nestle-Hershey combination as possible rather than probable. There's also a theory suggesting the longer Kraft leaves it without noise coming from another bidder the stronger hand it has got, Jones said.

One banker not involved in the situation but who covers the sector said Kraft would probably leave any bid until the last minute to iron out its financing arrangements, but rival bidders would likely emerge.

The deadline will draw out any rival bidders because they know the clock is ticking and if Kraft makes an attractive offer that appeals to shareholders Cadbury could fall beyond their grasp indefinitely. Most people expect Kraft to bid, the banker said.

Takeover Panel rules mean that if Kraft makes a formal offer before the deadline, there is then a period in which it must post the offer document, typically 28 days. It must then within 60 days get acceptances representing more than 50 percent of Cadbury shares or the offer lapses.

If that happens Kraft cannot offer again for another year. Such rules are designed to prevent companies coming under siege from predators for long periods.

(Editing by Mark Potter and David Holmes)

($1 = 0.6272 pound)