Nov. 10 (Bloomberg) -- Cadbury Plc investors betting on a takeover by Kraft Foods Inc. may have to wait three months or longer for any payday as Kraft takes its offer directly to shareholders of the U.K. candy maker.

Kraft has 28 days to submit its 10.2 billion-pound offer ($17 billion) to Cadbury shareholders after saying yesterday it is sticking to the terms of a preliminary bid in September. After that time, Cadbury investors have 60 days to tender stock.

“I don’t think this gets resolved in the short-term,” said Kevin Dreyer, who helps manage stock, including Cadbury shares, at Gamco Investors Inc. in Rye, New York. “It’s going to rumble on and get played out in stages.”

The cash-and-stock offer values Cadbury at 715 pence a share based on Kraft’s closing share price yesterday. That price compares with Cadbury’s close of 761 pence yesterday and prompted the London-based company to reject the bid as too low.

The offer is worth less now than when Northfield, Illinois- based Kraft first disclosed the initial terms on Sept. 7. The U.S. company formalized its offer of 300 pence in cash and 0.2589 new Kraft share per Cadbury share.

Cadbury rose 2 pence to 763 pence in London trading. Kraft advanced 27 cents, or 1 percent, to $26.80 at 4:15 p.m. in New York Stock Exchange composite trading.

“We believe our offer is fair and attractive,” Michael Mitchell, a Kraft spokesman, said in an e-mail. “We’ve heard nothing to make us change our view of what Cadbury is worth.”

A representative for Cadbury declined to comment.

Diminished Benefits

The current value of the bid is still 26 percent more than Cadbury’s share price on Sept. 4, the last trading day before the initial proposal was made public.

Paulson & Co. acquired almost 14.8 million shares of Cadbury yesterday at an average price of 759.59 pence, and now holds almost 2.1 percent of the U.K. candy maker’s stock, according to a filing today.

Kraft Chairman and Chief Executive Officer Irene Rosenfeld said this month the company will remain “disciplined” in its pursuit of Cadbury and is well-positioned with or without the U.K. company. Cadbury has called the offer an “unappealing prospect” from a “low-growth” conglomerate.

“Kraft look to have opted for a long and patient siege over immediate shock and awe,” Martin Deboo, an analyst at Investec Securities in London, wrote in a research note yesterday. Deboo has a “hold” rating on Cadbury shares. “We don’t think for a moment that 715p is Kraft’s final bid and we expect to see a higher final offer.”

Next Steps

U.K. takeover rules require Kraft to now submit its offer in writing to Cadbury shareholders within 28 days and ask investors to tender their stock. Kraft can choose to raise its bid at any time but must do so no longer than 46 days after the offer documents go out to shareholders. A competing bid would trigger a new timetable.

Lazard Ltd. is Kraft’s lead adviser on the takeover. Centerview Partners, Citigroup Inc. and Deutsche Bank AG are also advising the company. Cadbury is being advised by Goldman Sachs Group Inc., UBS AG and Morgan Stanley.

“Kraft is only bidding against themselves, but where the offer stands is not enough to get a deal done,” Gamco’s Dreyer said. Kraft’s statement yesterday shows the company “won’t wildly increase the price.”

Wooing Investors

Edgar Roesch, an analyst at Soleil Securities in New York, said in a note Kraft can pay as much as 765 pence while maintaining its goal that the acquisition add to earnings by the second year after closing. Alexia Howard, an analyst with Sanford C. Bernstein & Co. in New York, said yesterday in a note that a deal could get done at between 800 pence and 850 pence and that “more cash may be needed to woo investors.”

The amounts are lower than the 900 pence some analysts projected Cadbury could fetch when the offer was first announced. The stock rose to a record high of 805 pence after Kraft’s bid on speculation Switzerland’s Nestle SA and Hershey Co. may make competing offers.

“Kraft have played it well -- previous ideas of this going more towards 9 pounds now look a bit fanciful,” said William Hobbs, who helps manage 134 billion pounds in assets, including Cadbury shares, at Barclays Wealth in London. Kraft has been “aided by the apparent absence of other interested parties.”

A deal would push Kraft, the fourth-largest candy and chocolate maker by market share, past Mars Inc. as the world’s largest confectioner, based on data from researcher Euromonitor International. Kraft has said the combined company would have revenue of about $50 billion.

Melanie Kohli, a spokeswoman for Nestle, declined to comment yesterday. Kirk Saville, a Hershey spokesman, said the company doesn’t comment on merger and acquisition issues as a matter of policy.

To contact the reporters on this story: Duane D. Stanford in Atlanta at dstanford2@bloomberg.net; Andrew Cleary in London at acleary7@bloomberg.net.

Last Updated: November 10, 2009 16:18 EST