Kraft is set to make a hostile bid for Cadbury within a week. Under Takeover Panel rules, the American food group must bid for the British maker of Creme Eggs, Dairy Milk and liquorice allsorts by 5pm next Monday or walk away for six months.

Kraft will present its third-quarter results to investors tomorrow and it is unlikely to make a formal offer for Cadbury before its own shareholders have had a chance to analyse its financial performance carefully.

Investors in Cadbury, which has a big American shareholder base, will also want to compare Kraft’s sales with the robust third-quarter numbers released by the British company ten days ago.

Kraft and its advisers — Lazard, Deutsche Bank and Citigroup — have been digging in for the long haul in the £10.6 billion takeover battle. It received a blow last month when Bruce Wasserstein, Lazard’s chairman and lead adviser to the company, died unexpectedly.

Should Kraft make a hostile bid, it is likely that the outcome will not be decided until well into next year.

The American food maker, which already owns a number of British brands, including Terry’s chocolate orange, offered 745p a share for its target in September, but was rebuffed by Cadbury, which is advised by UBS, Goldman Sachs and Morgan Stanley.

In theory, Kraft has three options before next Monday’s deadline: to launch a hostile offer; to make a higher informal bid for the business in an attempt to engage Cadbury’s management in talks; or to walk away from its target. Analysts believe the first option is by far the most likely.

Bank of America Merrill Lynch issued a note last week, saying that there was a 75 per cent chance that Kraft would go hostile with a bid of 780p, a modest premium to its earlier offer. At this level, Cadbury’s board would probably feel that it could reject the revised bid in a move that could push the takeover battle beyond Christmas.

Cadbury’s shares, which have been drifting lower during the past two weeks amid fears that Kraft will struggle to improve its terms, closed at 770p last week. It is likely that investors would push Todd Stitzer, the company’s chief executive, and Roger Carr, its chairman, to talk to Irene Rosenfeld, Kraft’s chief executive, if the American group offered between 820p and 850p a share.

Kraft and Cadbury have been locked in talks with the British confectioner’s shareholders over the past fortnight to establish their views on a deal. Cadbury’s shareholders have started to put a price on a deal with Kraft, with one top shareholder saying last week that it would consider backing a merger at 820p a share, although others are understood to be reluctant to accept Kraft shares — which have underperformed the American market in recent years — as part of a deal.

D. A. Davidson & Co, the American consultancy, is forecasting a 1 per cent increase in net sales and a 32.4 per cent increase in operating profits on the same quarter last year when Kraft releases results tomorrow. Earnings per share — the key US financial measure — are forecast to be $0.48 for the third quarter, compared with $0.35 last year.

Bank of America Merrill Lynch said in a note that the results were crucial for shareholders, who are still not convinced of the merits of a merger between the two groups. “Kraft must demonstrate it is ready to take on Cadbury,” the bank said.

“In our view, Kraft shareholders are still not fully satisfied that the company has ‘turned the corner’ on its transformation plan and thus not ready to successfully integrate Cadbury. We think the third-quarter results will need to show that the company can drive revenue growth, moderate share losses and improve its profitability.”

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