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THE American food giant stalking Cadbury is preparing to sweeten its hostile £10 billion takeover bid for the British chocolate maker.

Irene Rosenfeld, chairwoman and chief executive of Kraft Foods, will raise her offer in the next two weeks in a final attempt to persuade Cadbury shareholders to succumb to a bid.

The maker of Dairylea and Oreo cookies has set a deadline of January 5 for its current cash-and-shares offer, but Cadbury investors are stubbornly holding out for a higher bid.

Cadbury shares closed at 797Åp on December 31 — 61Åp higher than Kraft’s offer. This leaves the American company with no option but to increase its price if it wants to win over shareholders.

Kraft has to make a move by January 19, after that date it can make a higher offer only if a rival takeover bid is made by another suitor.

Hershey, the American chocolate maker, is regarded as the most likely interloper. It has been working up detailed plans for a rival offer for several weeks, but it is expected to wait to see the details of any improved offer from Kraft before making a move. It may also wait for Cadbury to release critical trading information on January 15, as part of its defence against the Kraft bid.

Roger Carr, the Cadbury chairman, has already rejected Kraft’s existing offer as derisory and unappealing. Cadbury would prefer a tie-up with Hershey, a pure confectionery business, rather than being subsumed into Kraft — a company it describes as a low-growth conglomerate.

Carr is expected to reject any bid from Hershey or Kraft unless it tops 800p a share. Kraft has told its own investors it will maintain a disciplined approach to the bid battle and will not sacrifice its credit rating. Hershey also risks losing its investment-grade rating if it takes on too much debt to buy Cadbury. But it is thought that the charitable trust is prepared to sacrifice its rating to do the deal. Hershey has the most to lose from a Cadbury/Kraft tie-up.

Nestlé, the Swiss food giant, and Ferrero Group of Italy are also waiting in the wings and could still bid. Ferrero is thought to have met Hershey and private equity firms, KKR and Blackstone, to discuss a possible bid for Cadbury, but nothing firm has so far been agreed.

Carr has the backing of shareholders to fight off the current bid, but if Kraft raises its offer to more than 800p, he would come under pressure to open the company’s books.

Kraft’s hand has strengthened in recent days. When Kraft first revealed its takeover plans last September, its offer valued Cadbury at 745p a share, but over the following few weeks, Kraft’s shares slumped, squeezing down the value of the bid to 717p a share. Since then, Kraft’s share price has rallied, pushing the offer back up to 736p a share at the close of the year.