The US giant is expected to raise its offer for the Dairy Milk firm from 745p a share to 800p a share, perhaps as early as this week.

Cadbury, one of the few British industrial icons still in existence, has already rejected the informal 745p-per-share offer, but it expects the Americans to ramp up the pressure on its shareholders.

The fight between the two companies is shaping up to be long and bitter. Last week, Cadbury’s chief executive, Todd Stitzer, unleashed a withering criticism of “unbridled” capitalism, which he argued destroys shareholder value. Stitzer’s incendiary speech will be seen as an emotional appeal to shareholders to keep Cadbury independent.

Stitzer defended his firm’s “principled capitalism”. Without it, he said, “you risk destroying what makes Cadbury a great company”. He told a Fairtrade conference in London: “We see this principled capitalism, which has been woven into the very fabric of Cadbury over the course of almost two centuries, as fundamental to our ways of working and part of our identity and success. Take it away or dilute it and you risk destroying what makes Cadbury a great company.”

Though Stitzer did not mention Kraft, he went on to attack over-leveraged deals, warning shareholders that such bids risked destroying long-term value. His words appear to play to fears expressed by Warren Buffett, a big Kraft shareholder, who last week warned the US firm that it must be wary of overpaying for Cadbury.

Cadbury shares opened dealing at 800.5p yesterday and later closed 4.5p stronger. City analysts are speculating that Kraft may have to pay as much as 850p to gain control of the British company. Around half of the offer is expected to be in cash but Kraft is still putting together its financing package.

Some City analysts believe Kraft could raise its bid by as much as 20% to £12.3bn without losing a key investment grade rating on its debt.

“We believe at a price of 860p Kraft can increase the cash component of the transaction to at least 65%, and maintain an investment grade rating,” said analyst David Tovar at Bank of America/Merrill Lynch.

Credit Suisse’s Robert Moskow said Kraft has communicated with the debt rating agencies, and it sounds as if they are comfortable with what it has presented so far.

“We believe Kraft has a lot of leeway with the agencies to increase its bid,” said

Moskow, who believes Kraft will need to pay 850-875p to win the battle for the UK confectionery group.

Brokers Sanford Bernstein suggests Kraft might have the flexibility to raise its bid up to 900p. Analyst Andrew Wood said: “We consider Kraft will need to increase its offer up to 900p in order to stand a good chance of getting the deal done.”

Two of Kraft’s rivals – Nestle or Hershey – may also come forward and table an offer for Cadbury. Meanwhile, the Takeover Panel is expected to give Kraft a put-up-or-shut-up deadline, under which it must make a firm offer or walk away for at least six months.

A deal between Kraft and Cadbury, which is the world’s second biggest confectionery firm behind Mars, would create a global powerhouse with annual sales of around £30.5bn, according to Kraft. It would add brands such as Dairy Milk, Green & Blacks and Creme Egg to Kraft’s brands that range from Maxwell House coffee to Oreo biscuits, Ritz crackers and Philadelphia cream cheese.

In a move to calm union fears over future staff numbers, the US firm has sought to give assurances that a deal between the two companies would see jobs protected and possibly even created.

But Cadbury’s chairman Roger Carr has said the offer “fundamentally” undervalues the business and is of “uncertain value” for Cadbury’s shareholders.

He also dismissed the “unappealing prospect” of Cadbury being absorbed into “Kraft’s low growth, conglomerate business model” in an open letter addressed to Kraft chief executive Irene Rosenfeld.

Rosenfeld has the reputation of being a tough operator who has been accused bringing the tactics of the World Wrestling Entertainment ring to her pursuit of Cadbury, more or less demanding that Cadbury management cede control of the company without putting up much of a fight.

She wants to play a long game, hoping that Cabdury’s shares fall in value in coming weeks, helping her keep any improved offer to a minimum. That’s why the British company would like a quick decision from the Takeover Panel.

Rosenfeld believes Cadbury shareholders will eventually throw in the towel because, in her view, a tie-up makes economic sense. Cadbury faces raw material inflation over the next two years that could make growing profitability even harder. The more costs you can take out by a takeover, the more profitable the brands. As far as Rosenfeld is concerned, Cadbury shareholders will not have a better chance to cash in their investment.

However, some Cadbury shareholders in Britain are concerned that a knock-out offer by Kraft would see the reversal of the group’s recent commitment to the fair trade movement. The company’s Fairtrade accreditation for Dairy Milk is seen as a huge boost to a growing movement that achieved £750m sales last year in the UK.