Cadbury shares shot up 41 per cent to 803.5 pence at midday on the London Stock Exchange, about the minimum analysts suggested Kraft would have to pay to clinch a deal.

Cadbury said the offer undervalued the company, and expressed confidence in its "standalone strategy and growth prospects as a result of its strong brands, unique category and geographic scope."

Determined to win

Kraft was undeterred, however, and said it would continue to seek a transaction which Cadbury's board could support.

Kraft, whose brands include Velveeta cheese product and Oreo cookies, said it had proposed paying 300 pence in cash and 0.2589 new Kraft Foods shares per Cadbury share, valuing Cadbury shares at 745 pence.

That represents a 31 per cent premium over Cadbury's closing share price of 568 pence on Friday.

Holding out

Cadbury had a 10.3 per cent share of the world confectionary market in 2008, second only to Mars Inc with 14.8 per cent.

Kraft was fifth at 4.5 per cent.

Cadbury has 28.4 per cent of the world gum market, Kraft has 0.1 per cent.

Graham Jones, analyst at Panmure Gordon and Co, recommended that shareholders hold out for at least 800 pence a share.

"A key question is whether there is a counter bid, most likely from a Nestle-led consortium," Jones said. "However, we see the most likely scenario being Kraft being successful on improved terms."

- AP