By Marietta Cauchi 
   Of DOW JONES NEWSWIRES 
 

LONDON -(Dow Jones)- Hedge fund manager John Paulson doubled his stake in Cadbury PLC (CBY) the same day Kraft Foods Inc. (KFT) launched a formal GBP9.8 billion hostile offer for the U.K. confectioner, according to a U.K. regulatory filing .

The New York-based hedge fund bought some 14.8 million shares at 759.59 pence each Wednesday, boosting his total shareholding to 28.5 million, or 2.08% of the company. The price paid by Paulson was 1 pence below Cadbury's 761 pence closing price Wednesday. On Thursday, the stock closed up 0.3% at 763 pence.

Cadbury immediately rejected Kraft's bid which was no improvement on its earlier informal offer of 300 pence in cash and 0.2589 new Kraft shares for each Cadbury share which valued Cadbury at GBP10.2 billion and in fact worked out less because of a fall in Kraft's shares over the intervening period.

Kraft hasn't ruled out a higher offer and analysts agree that the bid undervalued the company. Many analysts think a likely price of at least 800 pence a share is necessary and that 850 pence would be more likely to seal a deal.

Paulson has made a habit, and a fortune, out of betting against the market, most recently that the U.S. housing market would collapse and risky mortgages would tumble in value.

-By Marietta Cauchi, Dow Jones Newswires; +44 207 842 9241; marietta.cauchi@dowjones.com

(END) Dow Jones Newswires

November 10, 2009 13:53 ET (18:53 GMT)

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