Without raising its September $16.4 billion offer, Kraft, the largest food and beverage company in the US, yesterday went hostile with its bid to acquire Cadbury, once again drawing an immediate negative response from the London-based confectioner.

Taking offer made on 7 September (See: Cadbury rejects Kraft Foods' $16.7 billion merger offer), which was rejected by the Cadbury board at the outset, Kraft has now gone directly to the UK confectioner's shareholders, offering 300 pence in cash and 0.2589 new Kraft share per Cadbury share, which was once again rejected by Cadbury, the maker of Dairy Milk chocolate.

Kraft made its hostile bid three hours before a deadline under British takeover law that required the Northfield, Illinois-based Kraft to make a formal offer or walk away for six months. (See: UK regulator sets 9 November deadline for Kraft's Cadbury bid)

Although the current value of Kraft's bid is still 25 per cent over Cadbury's share price on 4 September, Kraft's original $16.4-billion offer has been devalued due to a fall i n the value of its shares with the strengthening of the sterling against the dollar in the two months since the offer was unveiled in September.

Cadbury shares were worth 745 pence, when Kraft made its cash-and-shares offer for Cadbury, but due to Kraft's share price sinking and a falling dollar, that offer is now valued at 717 pence.

Cadbury's stock closed at 761 pence yesterday at London Stock Exchange, while Kraft shares fell 25 cents to close at $26.53 at the New York Stock Exchange.

In a statement Cadbury said that it notes the announcement of an unsolicited offer by Kraft of 300 pence and 0.2589 Kraft shares per Cadbury share, implying a value for each Cadbury share of 717 pence, ''The Offer's cash price per share and exchange ratio are unchanged from Kraft's announcement of 7 September. However, due to the fall in the Kraft share price since then, the implied value for each Cadbury share is around 4 per cent lower.''

Therefore, the Offer is worse than the proposal that the board has previously rejected as fundamentally undervaluing Cadbury and its prospects.''

Accordingly, the Cadbury board has recommended to its shareholders to reject the offer and Roger Carr, chairman of Cadbury, said, ''The repetition of a proposal which is now of less value and lower than the current Cadbury share price does not make it any more attractive. As a result, the Board has emphatically rejected this derisory offer and has strengthened its resolve to ensure the true value of Cadbury is fully understood by all.''

''Cadbury is an exceptional standalone business. It has strong iconic brands, a sharp category focus and an enviable geographic scope. Our successful financial delivery and strong business model reinforce the Board's belief in both the strategy and prospects of Cadbury as an independent company.

''Kraft's offer does not come remotely close to reflecting the true value of our company, and involves the unattractive prospect of the absorption of Cadbury into a low growth conglomerate business model.''

Irene Rosenfeld, chairman and CEO of Kraft Foods, said, "We remain convinced of the strategic merits for both companies of combining Kraft Foods and Cadbury. We believe that our proposal offers the best immediate and long-term value for Cadbury's shareholders and for the company itself compared with any other option currently available, including Cadbury remaining independent."

Kraft also said that combining the Kraft Foods and Cadbury businesses would create a global confectionery leader, with a portfolio including more than 40 confectionery brands, each with annual sales in excess of $100 million.

Globally, the combined group would be number one in the chocolate and sugar confectionery segments and a strong number two in the high growth gum segment.

Cadbury's leading brands such as Cadbury, Trident and Halls, are highly complementary to Kraft Foods' portfolio and would benefit from Kraft Foods' global scope, scale and array of proprietary technologies and processes.

It again reiterated that there is a significant opportunity to realise pre-tax cost savings of at least $625 million annually.

Under the UK takeover rules, Kraft will now have to table its offer in writing to Cadbury shareholders within 28 days and ask investors to tender their stock. During this time, Kraft can opt to raise its bid, but must do so within 46 days after submitting the offer documents to shareholders.