So the phoney war has ended and the £10 billion food fight is on. Cadbury bosses spent last week choking on their Curly Wurlys after Kraft Foods tabled a “derisory” cash-and-shares offer valuing the British confectioner at 717p a share.

Within hours the hedge funds pounced in force on Cadbury — snapping up an estimated 12%-14% of the shares in the hope that Kraft will come back with a higher offer. You can bet your buttons on that.

The only question now is how high will Kraft go? For all its chat about being disciplined and only paying what Cadbury is worth, it needs this deal. After puffing up its third-quarter figures it delivered just 0.5% growth — one of the lowest of all the global food companies — while Cadbury exceeded expectations with a top of the class forecast-beating 7% rise.

If the Dairylea maker fails in its quest for Cadbury it will be left with a $100m (£60m) bill from financing costs and red faces all round. It has no compelling stand-alone growth story and a bunch of shareholders who must be frustrated that its share price is still below its float price.

The American company is doing everything it can to talk down the prospects of a higher bid for Cadbury, as you would expect at this stage in the game. It points out that Warren Buffett, one of its biggest shareholders, has told it not to overpay and that it won’t do anything to jeopardise its credit rating. It also claims the synergies it can extract from a takeover are only $625m, rather than the $900m to $1 billion cited by many analysts.

Fortunately for Kraft — unless a counter-bidder emerges for Cadbury — all the initial froth and talk of a £10 per share bid has disappeared. One hedge fund said last week that people talking about bids of more than 850p a share must be long on a different cocoa derivative. It seems implausible shareholders will swallow any bid of less than 800p.

With so many hedge funds on the Cadbury register, it would be natural to assume a takeover is now inevitable. But many of the hedge funds chiefs who bought into Cadbury or raised their stakes last week — like John Paulson — also piled into the London Stock Exchange when it faced a bid from Nasdaq. They believed the LSE was undervalued, they didn’t sell out as expected and Nasdaq lost. If Kraft really wants Cadbury it must devour some more Oreos and come up with a sweeter offer.

British Land

The property giants British Land and Land Securities post half-year figures this week. Expect both to talk about a tale of two quarters.

The first was rotten — values were falling. The second quarter was better, with values back on the up, so expect the net asset value of both companies to still be down.

British Land will be the more interesting of the two. Chris Grigg, its new chief executive, wants the company to rethink its investment strategy and look at new asset classes such as nursing homes, prisons, or properties in Europe, alongside its traditional areas — retail and London offices.

Old-fashioned deals in wine bars will be out in favour of hard-nosed, scientific portfolio management designed to get the best returns for shareholders. Music to City ears.

jenny.davey@sunday-times.co.uk

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