Ferrero drops out of race to buy Cadbury

The maker of Nutella Ferrero is thought to have pulled out of talks to bid for Cadbury, which faces a £10.5bn hostile offer from US food group Kraft, according to reports tonight. The Italian confectionery firm had declared it was interested in Cadbury last year and was thought to be mulling a joint bid with Hershey, the US maker of the eponymous chocolate bars. However, Hershey is still believed to be considering making a solo bid for Cadbury, the maker of Dairy Milk.

On Tuesday, Cadbury reiterated its fierce opposition to the £10.5bn hostile bid made by the US food group Kraft, as the British company unveiled 2009 results ahead of City expectations. Publishing its second defence document yesterday, Cadbury's chairman Roger Carr urged shareholders not to let Kraft "steal" the company and lambasted the lower growth of Kraft's sales and share price over recent years. He claimed that Kraft's underperformance was partly because of its management, who "consistently promise one thing and deliver something else".

Yesterday, a Kraft spokesman said: "Cadbury's final defence document is underwhelming. They have said very little that is new and have ducked the issue of their profitability in 2010. We continue to believe that the certainty and upside potential provided by our offer remains the best option for Cadbury's shareholders."

The American food group has until 19 January to give details of a sweetened bid or to raise its offer, unless any competing offer is submitted.

Today, Irene Rosenfeld, the chief executive of Kraft, flew into London to meet Cadbury's shareholders. She is reported to have teed up talks with Legal & General, the company's biggest shareholder, among others today.