Some of Cadbury's biggest shareholders, led by Legal & General, continued to reject Kraft Foods' 10.5 billion pound ($17.2 billion) bid and will look for an increased offer over the next four days.

The British confectioner has been fighting off the U.S. food giant's hostile cash and shares bid for over four months, and on Friday received support from its No. 2 shareholder Legal & General Investment Management Ltd .

Adding to pressure on Kraft to raise its bid, the Wall Street Journal reported late on Friday that Hershey has concluded it has the financial muscle to top Kraft's offer and will likely make a bid next week of at least 800 pence to 820 pence, or $17.9 billion.

Our position on Cadbury is unchanged; we continue to believe that the current Kraft bid does not reflect the long term value offered by the company on a stand-alone basis, said L&G's head of UK equities Mark Burgess in a statement.

L&G is Cadbury's second-largest investor with a 5.1 percent stake behind New Jersey-based Franklin Mutual Advisers with 7.7 percent. The UK investor also rejected the hostile bid on September 7, 2009, the day the offer for Cadbury was made public.

Earlier this month, Kraft raised the cash portion of its offer by 60 pence but kept the overall value unchanged. The bid values Cadbury at 760p compared to a Cadbury share price which was off 0.75 percent at 793p at 1527 GMT.

Under UK takeover rules, Kraft has until January 19 to raise its bid. Analysts and investors believe the U.S. food giant will need to increase its bid to 800p or above to succeed.

In a vote of confidence for Kraft, Pershing Square Capital Management LP, a New York hedge fund run by activist investor William Ackman, has amassed a 2 percent stake in Kraft and has encouraged the food giant to pursue an acquisition of Cadbury.

HERSHEY PONDERS BID

Meanwhile, U.S.-based Hershey Co which is pondering a bid, according to sources close to the situation, will need to show its hand with a fully financed bid by January 23.

We're looking at something around the 850p - but with an increased cash component built in. We think 850p would be a good starting point, one top shareholder told Reuters.

Kraft's CEO Irene Rosenfeld made her own appeal to Cadbury shareholders this week at their London offices but was in listening mode rather than rather providing new information.

We found it very underwhelming. They ran through their targets.... They talked about a bid in the context of doing the deal, but they wouldn't talk about the level of the bid - for obvious reasons, the top shareholder said.

Another leading shareholder added Kraft did not have much to say and seemed to be priming them for a later announcement.

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, the shareholder said.

CADBURY'S TOP TEN INVESTORS

Four out of Cadbury's top ten investors are U.S.-based, according to data from ThomsonReuters. Hedge funds Paulson and Trian, run by billionaire activist investor Nelson Peltz, are ranked the seventh and the tenth largest shareholders.

Franklin Mutual Advisers - 7.73 pct

Legal & General Investment Management Ltd (UK) - 5.11 pct

Van Kampen Asset Management - 5.05 pct

BlackRock Investment Management (UK) Ltd - 4.71 pct

Morgan Stanley Investment Management Ltd (UK) - 2.41 pct

State Street Global Advisors (UK) Ltd - 2.39 pct

Paulson & Co. Inc - 1.95 pct

BlackRock Advisors (UK) Limited - 1.76 pct

Norges Bank - 1.61 pct

Trian Fund Management - 1.59 pct

Most of the top ten Cadbury shareholders are also large shareholders in Kraft.

Franklin Mutual and Van Kampen are ranked as the 14th and 15th largest investors. BlackRock Investment Management LLC and BlackRock Advisors (UK) are ranked the second and the ninth largest shareholders. State Street Global Advisors (US) is ranked as the third largest, while Morgan Stanley Investment Management Inc (US) comes in at number seven. Peltz's Trian is ranked as the 28th largest investor, while Norges Bank is ranked the 36th largest investor.

(Reporting by David Jones and Raji Menon; additional reporting by Megan Davies; editing by Sitaraman Shankar, Sharon Lindores and Andre Grenon)

($1=.6120 Pound)

New Jersey Cadbury United kingdom