NEW YORK/CHICAGO Kraft Foods Inc KFT.N shares fell about 5 percent in heavy trading on Tuesday, a day after the giant U.S. food company went public with a $16.7 billion takeover bid for Cadbury PLC CBRY.L, which the British candy maker rejected.
The shares of other food makers, who analysts said could participate in a wave of consolidation, rose. Campbell Soup Co (CPB.N), General Mills Inc (GIS.N) and HJ Heinz Co HNZ.N each jumped about 3 percent.
But some analysts suggested Cadbury offered a unique opportunity for Kraft to expand its chocolate business and enter the large market in India, unique characteristics that would not be found in other potential deals.
"I don't know how many (acquisition) opportunities there are," said Janna Sampson co-chief investment officer at OakBrook Investments, which holds shares of some food companies.
Cadbury, known for its chocolate bars, rejected the cash- and-stock bid that valued its shares at 745 pence each. Kraft said it was intent on pursuing the deal and analysts now expect the maker of Oreo cookies and Ritz crackers to raise its bid.
Kraft Chief Executive Irene Rosenfeld told analysts on Tuesday the company has been "and will continue to be disciplined" in its attempt to acquire Cadbury.
Kraft shares were down $1.41 at $26.69 in midday trading and were one of the few food stocks in negative territory. Cadbury shares rose 0.9 percent to 789.6 pence in London.
Hershey Co (HSY.N) shares were up less than 1 percent. The U.S. chocolate maker is seen as a potential bidder for part of Cadbury's business if Kraft's bid does not come to fruition.
Even though a deal would make strategic sense for Kraft, JP Morgan analyst Terry Bivens said it was typical for Kraft's shares to fall at first, due to expectations that earnings would be hurt in the near term.
"In typical form Kraft, as the acquirer, will likely be bid down, and the prospect of near-term dilution, and a deal price that is likely to climb, will be additional headwinds," Bivens wrote in a research note.
At the proposed offering price, Bivens estimated the acquisition would dilute Kraft's earnings 4 cents to 5 cents per share in fiscal 2010 and add 7 cents per share to earnings in 2011. He noted that Kraft might have to sweeten the offer to close the deal.
(Reporting by Martinne Geller, editing by Gerald E. McCormick and Andre Grenon)