U.S. food giant Kraft has until November 9 to say whether it will make an offer for British confectioner Cadbury or it must walk away for six months, Britain's Takeover Panel said on Wednesday.

It is now three weeks since the world's second largest confectionery group rejected an approach from North America's biggest food group worth 745 pence per Cadbury share, or 10.2 billion pounds ($16.3 billion), at the time in cash and shares.

Kraft said it had noted the decision and understands the implications, while Cadbury reiterated 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 pure play strategy and growth prospects, chairman Roger Carr said in a statement following the Takeover Panel 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 is reported to have said he saw sense in a Kraft deal.

Cadbury shares were up 0.3 percent at 801.5 pence by 1145 GMT, while Kraft was 0.2 percent lower at 17.98 euros in Frankfurt.


The Takeover Panel's announcement that Cadbury must make an offer by November 9 was consistent with market expectations of a deadline within a 4-6 week window, analysts at Nomura said.

Our understanding is that following any offer from Kraft it has 28 days to publish offer documents. At that point, if the offer is not accepted by the Cadbury board, Cadbury would have 14 days to publish a defense document, Nomura said in a note.

Bankers have said 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.

The takeover clock starts ticking when Kraft puts a formal offer down, said ABN Amro analyst Julian Hardwick. It just depends what Kraft's tactics are now and whether they want to put in their final offer and say that or play a longer game.

Credit Suisse estimated Kraft's proposal was worth about 12.5 times Cadbury's 2009 earnings before interest, tax, depreciation and amortization (EBITDA) but 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 at around 850 pence plus or minus a few pennies, said Shore Capital analyst Clive Black. 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 have said there was 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.

Bankers and analysts say it was still early days in the battle, casting doubt on reports a hostile bid is imminent.

The put up or shut up rule was designed to prevent companies coming under siege from predators for long periods. If a suitor does not table a bid within the allotted timeframe, it must walk away from the target for six months.

It worked as a defense mechanism for embattled British transport group National Express against FirstGroup in July, but not against a later approach by the Cosmen family and private equity firm CVC.

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(Editing by Mark Potter and Dan Lalor)

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