• Chicago Tribune, Tuesday, November 10, 2009 10:45 AM

After yesterday's swift-if-expected rejection of its formal takeover bid by Cadbury management, Kraft is expected to sweeten its offer and take it to the confectionary giant's shareholders, Mike Hughlett reports. They, in turn, face a difficult decision in weighing whether Cadbury management can deliver more value than Kraft in the long term.

"The offer is worse than the proposal the board previously rejected as fundamentally undervaluing Cadbury and its prospects," the board said in a statement, and chairman Roger Carr called it "derisory." Kraft's shares, which will finance 60% of the deal, have fallen slightly since the initial offer.

But Morningstar analyst Erin Swanson says that Cadbury shareholders may take a Kraft offer rather than hold on to Cadbury shares that are likely to drop, at least in the short term, if the bid fails. "That's the trade-off Cadbury shareholders will be forced to consider," says Edward Jones analyst Matt Arnold.

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