Swiss food giant Nestle may consider a bid for Britain's Cadbury to challenge a hostile 9.9 billion-pound bid by Kraft Foods Inc and a potential move by Hershey, Bloomberg reported on Sunday.

Nestle was still weighing its options and could decide against a bid, Bloomberg said, citing two unnamed people with knowledge of the matter.

Nestle declined to comment on Sunday.

Italian chocolate maker Ferrero and U.S.-based Hershey , have teamed up and said on Wednesday they were reviewing a possible offer for Cadbury.

Italian newspaper Il Sole 24 Ore has reported that Hershey executives will go to Italy to hold a definitive meeting with Ferrero in the coming days.

Ferrero was not available for a comment.

Meanwhile, Cadbury's Chairman Roger Carr told the Sunday Telegraph his group would prefer a merger with U.S. chocolate maker Hershey rather than Kraft . But he added both bids could fail should they not be generous enough.

COMPETITION HEADACHE

Analysts had been viewing Nestle as a potential suitor for Cadbury. But such a deal may face some antitrust hurdles.

Nestle said in October it was likely to exercise its option beginning in January 2010 to sell its remaining 52 percent stake in Alcon, potentially raising up to $28 billion, so it could easily afford big buys.

The Swiss giant has declined to comment on Cadbury so far. It has said it does not plan any big acquisitions this year or next, but will focus on a strategy of bolt-on buys.

Due to competition issues, analysts had speculated that the Swiss company might consider a joint offer with U.S.-based Hershey Co, with the U.S. group seeking Cadbury's chocolate interests and leaving Nestle with the Trident chewing gum business.

But Nestle has been silent since Hershey and Italy's Ferrero said separately on Wednesday they were considering a bid.

Some market players have suggested Nestle could still help Hershey fund a bid by buying its U.S. license for the KitKat brand, potentially worth around $3 billion to 3.5 billion.

The Cadbury riddle is a difficult one to solve as virtually all players would face antitrust issues if they move, said an M&A expert who declined to be named.

(Writing by Lisa Jucca and Emma Thomasson; additional reporting by Jo Winterbottom in Milan; Editing by Maureen Bavdek)

United kingdom Nestle Cadbury