LONDON - Cadbury fired the final salvo in its defence on Thursday, branding Kraft Foods' bid as more unattractive than a month ago, as Cadbury shares rose on hopes of a rival bid from Hershey.

But as Cadbury's Chairman Roger Carr attacked Kraft's bid and its past performance, analysts remained doubtful over how the much-smaller Hershey could finance an offer for Cadbury and top Kraft's 10.5 billion pound hostile bid.

Kraft's offer is even more unattractive today than it was when Kraft made its formal offer in December, Carr said in a final defence leaving Kraft five days to sweeten its offer.

Because the bid is over half in Kraft's shares, it exposed shareholders to Kraft's history of missed targets compared with Cadbury's robust results and excellent momentum into 2010, while the deal undervalued Cadbury compared with recent deals, he added.

This came after Britain's Business Secretary Peter Mandelson met with fund managers to urge them to take a more long-term view in takeover bids, and as Kraft's CEO Irene Rosenfeld went from door to door to woo Cadbury shareholders in London.

Hershey is still working on a Cadbury bid to top Kraft's offer according to a source familiar with the matter on Wednesday, while the Financial Times said Hershey had authorised drawing up a bid for Cadbury and making an offer within weeks.

But analysts said a solo Hershey bid could be extremely challenging as Hershey is only half the size of Cadbury and a big share issue would dilute the controlling Hershey Trust, while Kraft still has the option to sweeten its current bid.

We view a solo Hershey bid as a probability of 15 percent. We estimate a two-third probability of Kraft winning, said analyst Simon Marshall-Lockyer at Jefferies International, with the other probability being Cadbury remaining independent.

Other analysts pointed out that under the current timetable, Hershey only has nine days to come up with a formal offer which could prove tight if it is looking for partners to finance the bid and find buyers for parts of the Cadbury's business.
The FT report said Hershey was discussing a plan to authorise banker Byron Trott to bring private equity investors into the deal. Trott is a favourite adviser of Warren Buffett, whose Berkshire Hathaway (BRKa.N) is Kraft's top shareholder.

Marshall-Lockyer believes Hershey would likely have to sell its KitKat franchise in the United States back to Nestle for around $1.6 billion (979.6 million pounds) and then sell Cadbury's Trident gum business for $12.9 billion to leave Hershey with Cadbury's chocolate and candy businesses.

Cadbury has been defending itself for over four months against Kraft's bid worth 762 pence against Cadbury shares which closed 1.2 percent higher at 796p on Thursday, while analysts and investors say that Kraft needs to offer 800p or above to succeed.

Under UK takeover rules, Kraft has until January 19 to sweeten its bid, while Hershey has until January 23 to declare its hand and Cadbury shareholders until February 2 to decide on the Kraft bid.

Analyst Jeremy Batstone-Carr at Charles Stanley says any Hershey approach would have to be in cash and shares and involve a rights issue to leave the Hershey Trust without control. Even with selling off KitKat in the US and Cadbury's gum, Hershey would still struggle to mount a stand alone bid, he added.

We view the likelihood of its success as low, particularly given our strongly held belief that Kraft will raise its offer, Batstone-Carr said.

Meanwhile, Britain's Mandelson was urging big investors to take a longer-term view and not ignore local and workforce interests in takeover situations.

I ask Cadbury shareholders to take a longer view of shareholder value. I'm not in a position to block takeovers but I do have an obligation to raise and ask questions, he said.

While Kraft's Rosenfeld struggled to convince Cadbury shareholders of her case according to one top stockholder.
Kraft didn't have much to say. In fact, I thought it was a bit of a waste of time really. They seemed to be saying we are here now and you will hear from us at a later stage. They talked about strategy, but there was nothing beyond that.

(Additional reporting by Victoria Howley and Raji Menon)

(Reporting by David Jones; Editing by Jon Loades-Carter)

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