RPT-DEALTALK-Kraft seen going hostile with original Cadbury bid

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* Kraft likely to formalise original bid

* Move will turn Cadbury bid hostile

* Kraft needs 800 pence-plus bid to succeed

* Cadbury likely to reject anything below 800 pence

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By David Jones and Victoria Howley

LONDON, Nov 2 (Reuters) - Kraft (KFT.N) is likely to formalise its original offer for Cadbury (CBRY.L) over the next week, keeping a price increase off the table but in effect turning the bid hostile, said sources close to the matter.

The sources added that while a higher offer of 800 pence a share was still seen as the minimum to tempt Cadbury to the negotiating table, Kraft was willing to play the waiting game and keep any price increase for later.

Kraft's offer in early September was rejected by Cadbury, so a move to formalise this cash and shares offer at the same value, then worth 745 pence or 10.2 billion pounds ($16.7 billion), would not change Cadbury's position and turn the bid hostile.

The U.S. food giant believes there is no rival bidder for Cadbury and so is keen not to overpay. It has watched Cadbury's shares drift down from a high of 808.95 pence after Cadbury's upbeat third-quarter update on Oct 21 to trade around 777 pence by 1520 GMT.

"Kraft has wanted to engage with Cadbury but that seems unlikely, so formalising the original bid seems the best starting point to take the bid battle forward," said one source close to the situation.

Kraft and Cadbury declined to comment.

Kraft reports its third-quarter earnings on Tuesday at 2100 GMT and sources and analysts believe a formal approach will be made to Cadbury after that date and before the deadline of 1700 GMT on Nov. 9 set by Britain's Takeover Panel.