Kraft turns hostile in bid for Cadbury

By David Jones and Brad Dorfman

LONDON/CHICAGO (Reuters) - Kraft Foods Inc chief Irene Rosenfeld refused to sweeten her $16.2 billion (9.7 billion pounds) offer for candy maker Cadbury Plc and took the bid directly to shareholders on Monday, setting the stage for a takeover battle that could last up to three months.

North American food giant Kraft repeated on Monday the cash and shares terms of its original offer, which Cadbury rejected two months ago, and formalized the bid to meet a UK Takeover Panel deadline. The bid is now worth about 5 percent less after a fall in Kraft shares.

Cadbury lost no time rejecting the hostile bid as a "derisory offer," as Chairman Roger Carr termed it. Cadbury investors also said they would not countenance the offer without a substantial sweetener, to at least 800 pence per share from the current deal value of 709 pence per share.

"They need to raise the bid from here to be successful and they don't seem willing to do that," one top 10 investor in Cadbury told Reuters. "If there is 8 pounds plus on the table, it is going to be difficult for Cadbury shareholders to walk away from that."

A source familiar with the situation said this was not likely to be the final offer from Kraft, which was committed to making a case to shareholders after having given up on an endorsed offer from Cadbury's board.

"This just starts a new clock ticking," the source said, adding that Kraft had made no effort to hold talks with Cadbury in recent weeks.

Rosenfeld has repeatedly insisted she will not overpay for Cadbury and has a history of sticking to her guns for Kraft. Cadbury's Chief Executive Todd Stitzer has said a link-up with Kraft made no strategic sense and that it has a strong future as an independent candy maker.

Cadbury is the world's second-largest confectionery group and the maker of Dairy Milk chocolate. Kraft is No. 5, with Toblerone, Cote D'Or, Terry's and Suchard, in addition to food brands such as Velveeta cheese and Maxwell House coffee. Combined, they would edge out privately owned Mars-Wrigley from the global No. 1 confectionery spot.