KRAFT-PURSUES-CADBURY

Kraft Foods Inc. said it would pursue a takeover of Cadbury after the British maker of Trident gum and Dairy Milk chocolate rejected a bid of 10.2 billion pounds ($16.7 billion).

Kraft’s 745-pence-a-share proposal may trigger rival offers from Nestle and Hershey Co., forcing Kraft to raise its bid, analysts said.

Kraft, the maker of Oreo cookies and Kool-Aid drinks, said that buying the British company would create a “global powerhouse” with annual revenue of about $50 billion. Evolution Securities analyst Warren Ackerman estimated that Cadbury might be worth as much as 1,200 pence a share.

The bid “might seem attractive, but we think Cadbury can get much more,” said Andrew Wood, an analyst at Sanford C. Bernstein & Co. in New York, who has an “outperform” rating on Cadbury shares. “It makes perfect sense for Kraft to acquire Cadbury.”

Kraft, of Northfield, Ill., plans to offer 300 pence in cash and 0.2589 of a new Kraft share per Cadbury share, valuing the confectioner at 31% more than last week’s close.

Cadbury said the bid fundamentally undervalued the company.

“It’s clearly hostile,” said Andy Smith, an analyst at Icap in London. The deal is a “near-perfect geographical fit. It’s unlikely Kraft will just walk away.” Smith said the U.S. company might need to raise the bid’s cash component to get Cadbury to agree to a sale.

Kraft said its announcement aimed to “encourage and further” dialogue with Cadbury after its approach was rebuffed.

Cadbury shares jumped 215 pence to 783 pence in London trading, after having risen to as much as 808 pence in earlier trading. More than 62 million shares were traded, more than 12 times the daily average for the last three months.