Cadbury's price could top £12bn as Kraft's rivals circle

US giant expected to raise its bid as insiders say Hershey will not stand idle

Cadbury's takeover price could rise as high as £12.3bn if the likes of Nestlé and Hershey join the race to take over the British confectioner, according to industry experts.

The iconic maker of Dairy Milk and Liquorice Allsorts rejected a £10.2bn cash and share offer from the US giant Kraft Food on Monday, dismissing the approach as opportunistic and not a fair reflection of the company's value.

Kraft, the maker of Ritz crackers and Oreo cookies, is widely expected to raise its 745p-per-share offer. Not only did the company's statement on Monday confirm it is "committed to working toward a recommended transaction and to maintaining a constructive dialogue", but its chief executive, Irene Rosenfeld, told analysts in the US yesterday that Kraft has been and "will continue to be disciplined" in its efforts with regards to Cadbury.

And with the British company's shares rocketing up by 38.9 per cent on news of the approach on Monday, Kraft's 31 per cent premium swiftly melted. By the end of Monday, Cadbury was at 783p. It gained another 3p yesterday to close at 786p.

Meanwhile, when the New York Stock Exchange opened after the Labor Day holiday yesterday – for the first time since Kraft went public with its plan – its shares dropped by nearly 6 per cent in early trade. This dragged down the value of the share element of the package, while raising the cost of the bid to Kraft.

Cadbury was sticking to its guns yesterday, restating its commitment to an independent future and pointing to the group's successful margin improvement strategy.

But the vultures are circling. Insiders at Hershey, the US sweets maker, said yesterday that the company is "likely to make some response" to Kraft's move. Nestlé is also widely expected to wade into the bidding – most likely in a consortium with Hershey – despite the non-committal statements from the Swiss giant's chief executive, Paul Bulcke, on Monday. The names of Kelloggs and PepsiCo are also being bandied about in the City.

Insiders started the week with predictions that Kraft would need to raise its offer to at least 800p. But City analysts were busy raising their target prices yesterday. Evolution Securities and Jefferies International point to 900p, taking the bid price up beyond £12bn. Bernstein Research went even further, positing a range from 855p as high as 1070p.