Dairy Milk maker Cadbury today looked set for a takeover tussle with US food giant Kraft after it rejected a surprise £10.2 billion approach.
Kraft - the firm behind brands including Dairylea, Kenco coffee and Terry's Chocolate Orange - said it was "committed" to a deal and wanted constructive talks with its target.
The group also revealed plans to safeguard jobs should a deal succeed, including saving Cadbury's historic Somerdale plant near Bristol from closure.
Cadbury said Kraft's unsolicited cash-and-shares proposal "fundamentally undervalues the group and its prospects".
But shares in the Dairy Milk maker soared 41% as investors relished the prospect of a higher bid from Kraft or even other suitors entering the fray.
Cadbury, founded by Quaker John Cadbury in 1824, has been touted as a takeover target since spinning off its US drinks business last year.
Analysts today speculated that Kraft may be forced to up its 745p-a-share offer to at least 800p - equivalent to £11 billion - to secure a Cadbury deal.
However, it could face competition from other global food rivals such as Hershey, Nestle and Mars, according to experts.
A takeover of Cadbury would mark the biggest in the UK sweets sector since Nestle bought Rowntree in 1988.
Kraft said it was "eager to build upon Cadbury's iconic brands and strong British heritage".
A deal between Kraft and Cadbury, which is the world's second biggest confectionery firm behind Mars, would create a "global powerhouse" with annual sales of around 50 billion US dollars (£30.5 billion), according to Kraft.
The group also sought to give assurance that a deal between the two would see jobs protected and possibly even created.
Kraft hopes to keep open Cadbury's Somerdale facility near Bristol, which is currently scheduled to close in early 2010, while also investing in the firm's Bournville factory near Birmingham.
It said it wanted to "undo" some of Cadbury's streamlining, although it admitted there may be job losses outside the UK under aims to strip out around 625 million dollars (£381.5 million) in costs a year from the merged groups.
Kraft is the world's second biggest food firm, with brands well-known internationally, including Philadelphia soft cheese, Toblerone, Oreo and Maxwell House.
It has annual sales of 42 billion dollars (£25.6 billion) and 100,000 employees worldwide.
In the UK, Kraft employs around 1,500 staff across its headquarters in Cheltenham, Gloucestershire, a coffee manufacturing plant in Banbury, Oxfordshire and a regional office in Kew, west London.
Irene Rosenfeld, chairman and chief executive of Kraft Foods, said: "We have great respect and admiration for Cadbury, its employees, its leadership and its proud heritage."
She added: "Our current plans contemplate that the UK would be a net beneficiary in terms of jobs."
Trade union Unite gave a cautious welcome to Kraft's comments on UK jobs and said it had requested meetings with both Kraft and Cadbury to discuss implications for staff.
Unions fought hard, but failed to overturn Cadbury's decision to close the Somerdale site in Keynsham near Bristol, while they are also now involved in an ongoing dispute over pay with the sweets firm.
Jennie Formby, national officer for Unite, said: "Recent years have seen a great deal of upheaval for Cadbury workers in this country. They've seen work transfer away from their communities to new plants in Poland, jobs go and now a breaking of a promise on pay.
"It is essential that no-one makes rash promises which give false hope to the workforce, and in particularly to our members under threat of redundancy at the Somerdale plant."
Cadbury also appeared to give Kraft's initial proposal short shrift.
It said: "The board is confident in Cadbury's standalone strategy and growth prospects as a result of its strong brands, unique category and geographic scope and the continued successful delivery of its Vision Into Action plan."
While Kraft's proposed offer comes at a 31% premium to Friday's closing price for Cadbury shares, it follows hefty stock market falls amid the financial crisis.
Jeremy Batstone-Carr, analyst at Charles Stanley, described the approach as "opportunistic".
"Kraft will need to up its offer to have any chance of success, perhaps to 800p a share or higher," he said.
"An approach at this level will concentrate the minds of other potentially interested acquirers such as Mars, Nestle and Hershey."
Investec analyst Martin Deboo also said the offer was "short of a knock-out blow".
Cadbury has held up well despite the recession, recently revealing that half-year profits rose 11% to £262 million as the tough economic climate failed to dampen demand for treats and sweets.
While a marked improvement, its figures have not come without cost, with Cadbury hiking prices and cutting staff to save cash.
Cadbury announced plans in 2007 to slash 15% of its factory numbers worldwide, leading to a 15% reduction in its global headcount - equivalent to 7,800 jobs.
It is now also embroiled in a dispute with staff over pay and faces strike action after workers last week backed industrial action over complaints the firm was refusing to honour the final year of a three-year pay deal.Reuse content