Key Cadbury investors feel that Kraft's bid of 771 pence a share undervalues the British chocolate maker and the US confectionery giant would have to raise the offer to 850 pence to "have any hope of success", media reported here.
"Key Cadbury investors have told Kraft that it will have to raise its bid for the confectioner to 850 pence a share if it is to have any hope of a successful bid," the Sunday Telegraph said.
Another British daily the Sunday Times said that "a group of 14 hedge-fund managers with shares in Cadbury told Irene Rosenfeld, chief executive of Kraft, last week that they wanted at least 850 pence a share".
Peter Langerman, CEO of US-based Franklin Mutual Advisers, told the Sunday Times that "the present offer materially undervalues the group". Franklin Mutual Advisers is Cadbury's biggest investor with a 7.7 per cent stake.
Kraft is putting finishing touches to its final bid this week. It has until Tuesday to raise its bid, but is expected to do so tomorrow, the Sunday Times said, adding that Kraft would then have until February 2 to secure acceptances from 50 per cent or more of Cadbury's shareholders.
Kraft has already raised the cash portion of its offer from 300 pence to 360 pence after selling its US pizza business for $3.7 billion. However, it reduced the equity part to keep the total value the same.
"The new offer, which is expected to improve Kraft's bid from 771 pence per share to at least 820 pence, will test the resolve of Cadbury's loyal shareholders — but many insist they will hold out for a higher price," the Sunday Times said.
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The Sunday Telegraph further said quoting investors that "Kraft should include a cushion in its final bid in case its stock falls on concerns – made public by key Kraft investor Warren Buffett – over plans to issue up to 370 million shares to fund a deal".
Kraft has so far insisted that it will remain "financially disciplined" in order to hang on to its credit rating. If Kraft was to raise its bid to around 820 pence, the company would have to stump up another $1.3 billion, the report said.
Citing analysts, the Sunday Telegraph said it can afford 820 pence a share and keep its investment grade rating.
Meanwhile, Hershey, the American confectionery company, is also thought to be edging closer to a bid for Cadbury, the newspaper said.