Nov. 21 (Bloomberg) -- Hershey Co.’s controlling trust wants the candy company to make a $17 billion bid for British confectioner Cadbury Plc, the Wall Street Journal reported, citing unidentified people familiar with the matter.

The offer would trump Kraft Foods Inc.’s bid for Cadbury and have a higher cash component, the newspaper reported. In one scenario under discussion, Hershey would contribute at least $10 billion in cash and $2 billion in new Hershey shares, the Journal said yesterday. The bid wouldn’t be ready for at least two weeks, the paper said.

Cadbury, which makes Creme Eggs and Dairy Milk chocolate, would bring buyers a better platform to bolster its brands in the U.K. and to break into developing markets including India. Ferrero SpA, the Italian maker Nutella, also said this week it’s interested.

Kraft was first to make an approach. It made a hostile bid for Cadbury more than two months ago, totaling 10.4 billion pounds ($17 billion) based on yesterday’s closing stock prices. The cash-and-share offer values Cadbury at 726 pence a share. The London-based company, which closed at 801 pence yesterday, has traded above the bid price since the offer was made.

Candy and Gum

Ferrero’s controlling family and Hershey executives may meet “soon” in Italy to discuss a possible joint bid, daily Il Sole 24 Ore reported today, without saying where it got the information. Hershey may seek support from a private-equity fund, probably KKR & Co., if Ferrero decides not to take part in an offer for the U.K. confectioner, the newspaper said. The possibility that Nestle SA would challenge a Hershey bid and Kraft Foods Inc.’s offer is becoming “increasingly concrete,” Sole said, citing financial executives.

Ferrero and Hershey may split up Cadbury, with the Italian company interested in the candy and chewing gum businesses, Sole said. Ferrero may value the assets it wants at as much as 8 billion euros ($11.9 billion), Sole said. Banks may provide 5 billion euros and the Ferrero family the remaining, the daily said. Ferrero plants to meet next week with Italian banks Intesa Sanpaolo SpA and UniCredit SpA about financing an offer, Sole said.

Hershey, which makes and sells Cadbury brands in the U.S., is controlled by a charitable trust, which funds a Pennsylvania boarding school. The trust canceled an auction for Hershey in 2002. It rejected a joint Cadbury-Nestle SA bid and another offer from Wm. Wrigley Jr. Co. following opposition in the company’s home state.

Father and Sons

The only way Hershey could finance a bid is if the trust decided to move to a single-class share structure, relinquishing its control and making it easier to sell new stock, said Pablo Zuanic, an analyst at JPMorgan in London.

Former Goldman Sachs Group Inc. banker Byron Trott is talking to investors about supplying an additional $3 billion to $5 billion in cash to help with the purchase, according to the newspaper. The trust would sell assets, though it would try to maintain control of Hershey, the Journal said.

Hershey and the trust are working with JPMorgan Chase & Co. and Bank of America Corp., according to the Journal.

Representatives of Hershey Co., Hershey Trust, JPMorgan and Bank of America declined to comment.

Ferrero, based in Pino Torinese, Italy, is privately held. London’s Times newspaper said the controlling family’s founder is at odds with his sons about whether to make a bid. A spokesman for Ferrero declined to comment.

Northfield, Illinois-based Kraft, the maker of Oreo cookies, rose 20 cents to $27.17 yesterday on the New York Stock Exchange, while Hershey, the Hershey, Pennsylvania-based chocolatier, added 4 cents to $37.18.

To contact the reporters on this story: Jennifer Sondag in New York at jsondag@bloomberg.net; Duane D. Stanford in Atlanta at dstanford2@bloomberg.net.

Last Updated: November 21, 2009 11:19 EST