UPDATE 3-Shareholder sues Cadbury officers over Kraft bid

* Lawsuit alleges breach of fiduciary duty

* Say Cadbury failed to properly consider Kraft bid

* Cadbury spokesman notes no formal offer has been made

* Kraft, not party to suit, declines to comment (Adds details on Kraft's bid)

By Brad Dorfman

CHICAGO, Oct 1 (Reuters) - A shareholder of Cadbury (CBRY.L) is suing the British confectioner's board and chief executive, saying investors "stand to lose out massively" if the company refuses to negotiate over a $15.68 billion takeover bid from Kraft Foods Inc (KFT.N).

The lawsuit, filed in U.S. District Court in New Jersey on Wednesday by Steward International Enhanced Index Fund, seeks class action status and names Cadbury CEO Todd Stitzer, Chairman Roger Carr and the company's board of directors as defendants.

The lawsuit asks the court to order Cadbury directors and officers to respond in good faith to offers which are in the best interest of Cadbury shareholders and to prevent Cadbury's board from enacting takeover defenses.

"Cadbury shareholders stand to lose out massively if the Cadbury board continues to refuse to negotiate a transaction with Kraft," the lawsuit said. "But Cadbury's board stands to lose its lavish compensation and positions of power if Cadbury is sold."

Kraft made public its proposed offer for Cadbury on Sept. 7 after Cadbury rejected the bid. On Tuesday, Britain's Takeover Panel said Kraft, the world's second-largest foodmaker, had until Nov. 9 to make a formal offer for Cadbury or else walk away for six months.

The lawsuit says Cadbury shares were trading at 581 pence when Kraft CEO Irene Rosenfeld proposed a purchase of Cadbury that was then valued at $16.7 billion, or 745 pence per share. Cadbury shares closed at 803.5 pence on Thursday in London.

A Cadbury spokesman said on Thursday that the company has not seen the lawsuit. "However, we note that no offer has been made for Cadbury" under British law, spokesman Trevor Datson said.

Kraft, which is not named as a party in the lawsuit, declined to comment.

SHORT-NOTICE FINANCING

One step in making an offer is for Kraft to show it has committed financing in place. Banking sources told Reuters Pricing Corporation on Thursday that Kraft bankers are confident it can arrange a jumbo bridge loan to finance the bid. [ID: nL1692004]

Citigroup, Deutsche Bank and HSBC will co-ordinate the bridge loan, but that group could be expanded further, a senior banker close to the deal told RLPC.