Nestlé’s decision to formally rule out a bid for Cadbury this week is likely to reduce the chance of Hershey making a bid.

The US confectioner, which holds the licence to produce Cadbury products in the US, was seen as the most likely rival to Kraft.

However, it is unlikely to be able to raise enough finance to purchase Cadbury outright, according to Investec analyst Martin Deboo, and so would look for a co-bidder to purchase part of the Cadbury business. With Nestlé as a possible purchaser for Cadbury’s gum business, Hershey would have been more likely to secure a viable bid. As Ferrero, the other contender, is understood to be mainly only interested in Cadbury’s smaller candy business, the chances of anyone making a bid significantly higher than the current Kraft offer now look remote.

“Nestlé’s withdrawal, coupled with Warren Buffett’s high-profile signal to Kraft management that he would not support an increased bid, mean the scope for significantly increased offers is reduced,” said Deboo. “As a result, Cadbury share prices have fallen and now show only a small premium above Kraft’s current offer price.”

But another analyst said Buffett’s move, coupled with Kraft share price movements, showed Kraft had not convinced its own shareholders of the merits of the Cadbury bid.

“A large proportion of their offer is in the form of Kraft shares, which fall whenever they suggest they might improve the bid,” he said. “As a result, they’re effectively unable to up their price at all. Their chances don’t look good.”

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