Cadbury and Hershey in bid talks

Cadbury has has been the subject of a 'derisory' takeover bid by Kraft

Cadbury and Hershey are in talks with a view to the American company making a bid for the Birmingham based confectioner, the BBC has learned.

Cadbury has been the subject of a hostile £10bn ($16bn) takeover bid from Kraft Foods over the past few weeks.

However, Hershey, which already makes some Cadbury products under licence in the US, is understood to be willing to offer more cash.

Kraft's offer was described by Cadbury as "derisory".

The BBC's Joe Lynam says Hershey's increased offer would, if talks succeed, be made with the blessing of Cadbury's board.

Last month Kraft, which is the world's second largest food manufacturer, made an unapproved offer of 718p per share for Cadbury.

That offer was well below the current stock exchange value of the company at 790p per share.

Food fight Cadbury brands include Wispa, Dairy Milk, Flake and Creme Egg Hershey brands include Hershey bars and Reece's pieces Kraft brands include Oreos, Planters peanuts, Philadelphia cheese

On Monday morning, Cadbury is expected to make a formal rejection of that Kraft offer but is unlikely to comment on any talks with Hershey as no formal bid has been tabled by the company yet. It will also release a trading update.

A spokeswoman from the union Unite said that if Hershey was about to make a bid, they would be asking some tough questions.

"If new bidders do emerge, we will seek to raise with them the same concerns we raised with Kraft. What are their investment plans? Will the company stay based in the UK? We want commitments in terms of jobs, pensions and pay to stand for at least the next five years," she added.

On Saturday, Unite said that Cadbury shareholders should reject the Kraft offer as it would cost jobs in the long run. The shareholders must decide by January 5th.

Last week, the Business Secretary Lord Mandelson warned that he would oppose any buyer that fails to "respect" the historic confectioner's traditions and was bidding purely for the sake of making a "fast buck".

Hershey was unavailable for comment.