July 13 (Bloomberg) -- Shares of Kraft Foods Inc., the world's second-largest foodmaker, rose 3.1 percent after the Wall Street Journal reported that activist investor Carl Icahn bought shares in the company.

The stock increased $1.09 to $35.89 at 4:24 p.m. in composite trading on the New York Stock Exchange. The Journal said today that Icahn had acquired an undetermined stake in Kraft, citing people familiar with the situation.

Chief Executive Officer Irene Rosenfeld has also agreed to meet with billionaire investor Nelson Peltz next week, the Journal said. Rosenfeld, who took charge of Kraft a year ago, may be pressured by investors to shed slower-growing units that may include Post cereal, analysts said.

``Obviously Kraft has a portfolio of extraordinarily valuable brands,'' said Thomas Russo, who manages more than $3.5 billion including 1.8 million Kraft shares at Gardner Russo & Gardner in Lancaster, Pennsylvania.

``The categories in which it competes, confectionary and coffee, are going through a period of consolidation driven by strategic and private-equity investors,'' he said.

Neither Icahn nor Carrie Bloom, a spokeswoman for Peltz, immediately returned phone calls seeking comment. Kraft spokeswoman Donna Sitkiewicz declined comment.

Icahn often uses his influence as a large investor to press for changes at companies to boost the price of the shares.

Time Warner

He bought stakes in companies including Time Warner Inc. and ImClone Systems Inc. and forced management to add new directors, boost buybacks or change strategies.

Kraft has drawn interest from activists less than four months after its spinoff by Altria Group Inc., the world's biggest tobacco company by stock market value.

Rosenfeld is spending as much as $400 million extra this year to spur sales of cheese, deli meats and other products where Kraft is battling lower-price rivals. Post cereals that include Honey Bunches of Oats trail Kellogg Co. and General Mills Inc. in U.S. sales.

Kraft plans to finance the $7.2 billion acquisition of Group Danone SA's cookies and cracker unit, announced July 3, with debt, leaving funds to repurchase $5 billion in stock over the next two years.

``If Kraft wants to create a more sustainable business, they're going to need to step up divestments,'' Matthew Kaufler, who helps manage $2.6 billion at Clover Capital Management, said yesterday. The Rochester, New York-based firm sold its Kraft shares last month.

Kraft trails Switzerland's Nestle SA by revenue.

More Shares

Peltz and Icahn may urge borrowing to buy back even more shares, said Donald Yacktman, who oversees $1.1 billion including 1.1 million Kraft shares through March at Yacktman Asset Management in Austin, Texas.

Peltz recently bought a 3 percent stake in Kraft, which is valued at $57.6 billion based on today's closing price. Before today, shares of Kraft had declined 2.5 percent this year.

Rosenfeld, 54, said in an interview July 3 that Kraft is ``happy to have conversations with any and all potential and current investors.'' She declined then to say whether she had talked to Peltz.

Peltz is the largest shareholder in Wendy's International Inc. through Trian Fund Management LP, a investment fund he started in November 2005 along with Peter May and Ed Garden.

Peltz, who also owns the Arby's restaurant chain, was successful in getting Wendy's, the third-largest U.S. hamburger chain, to spin off its Tim Hortons doughnut chain and sell its Baja Fresh restaurants last year.

To contact the reporter on this story: Chris Burritt in Greensboro, North Carolina cburritt@bloomberg.net.

Last Updated: July 13, 2007 18:11 EDT