Cadbury Finds Kraft Bid Insufficiently Sweet

Updated from 12:14 a.m.

LONDON -- Kraft Foods(KFT Quote) offered 10.2 billion pounds ($16.7 billion) to buy Cadbury(CBY Quote), but the British candy maker rejected the bid.

In a statement, Cadbury's board said Kraft's offer "fundamentally undervalues" Cadbury and its prospects. The board added Monday that it's confident in the company's standalone strategy.

Kraft seems intent on a transaction, however. Following Cadbury's rejection of the offer, the Northfield, Ill.-based food company said it is "committed" to working toward a deal that Cadbury can accept.

Kraft said the proposed deal would create a "global powerhouse" in snacks, confectionary and quick meals, with a geographically diversified business and leading positions in developing markets such as India, Mexico, Brazil, China and Russia.

Cadbury shares surged more than 42% to 808 pence ($13.20) in London before closing at 783 pence ($12.79), up nearly 38% from Friday's close of 568 pence ($9.30). The 800-pence level is consistent with what British analysts said Kraft would eventually have to pay to seal a deal, the AP reported.

The candy maker's U.S. shares didn't trade Monday because U.S. stock markets were closed in observance of Labor Day. The U.S. shares will play catch-up when U.S. markets reopen Tuesday. Gains similar to the ones in London would boost Cadbury's U.S. shares to more than $51 from their Friday close of $37.46.

Kraft said it offered 300 pence ($4.91) in cash plus 0.2589 new Kraft Food shares for each Cadbury share. That values Cadbury shares at 745 pence ($12.20), a 31% premium over Cadbury's London closing price on Friday.