Kraft turns hostile in $16 billion bid for Cadbury

By David Jones

LONDON (Reuters) - Kraft Foods chief Irene Rosenfeld stuck to her guns in the pursuit of candy maker Cadbury, refusing to sweeten her $16.4 billion offer, triggering a bid battle that could last up to three months.

The North American food giant Kraft on Monday repeated the cash and shares terms of its original approach, which Cadbury rejected two months ago, and took its bid, now worth 4 percent less after a fall in Kraft shares, directly to Cadbury shareholders.

Cadbury lost no time rejecting the "derisory offer," as chairman Roger Carr termed it.

Kraft's Rosenfeld has repeatedly insisted she will not overpay for Cadbury, while Cadbury's chief executive Todd Stitzer has said a link-up with Kraft made no strategic sense and it has a strong future as an independent sweetmaker.

"We remain convinced of the strategic merits for both companies of combining Kraft and Cadbury," Rosenfeld said in the formal offer statement.

Cadbury's shares fell sharply to 739p after the unchanged bid terms were announced but had edged back to stand up 0.3 percent at 760p by 1445 GMT (9:45 a.m. EST).

"Kraft's offer does not come remotely close to reflecting the true value of our company, and involves the unattractive prospect of the absorption of Cadbury into a low-growth conglomerate business model," Cadbury's Carr said.

The formal bid values Cadbury shares at 713p or 9.8 billion pounds ($16.44 billion), compared with 745p a share, or 10.2 billion pounds, at the time of Kraft's approach in September.