The increased offer, reported to be 840p per share, plus a 10p dividend, is expected to result in an official announcement today (19 January) that the Cadbury board will recommend the deal to shareholders.
Cadbury, in a statement, said: "The boards of Kraft Foods Inc and Cadbury plc confirm that they are finalising the terms of a recommended offer for Cadbury plc. A further announcement will be made shortly."
Takeover Panel rules call for Kraft to submit its best and final offer for Cadbury by 5pm today or walk away.
Although US chocolate maker Hershey could still come in with a bid for Cadbury, a Kraft/Cadbury deal now looks all but done.
The Birmingham-based confectioner has conducted a long campaign of resistance since August last year, when Kraft chief executive Irene Rosenfeld proposed an offer worth 745p per share, with Cadbury's stock trading at 568p at the time.
Although Cadbury has enjoyed a successful 186-year history, intrinsically linked to its UK base, the defence against Kraft's overtures has generally concentrated on the original offer undervaluing the company.
Today's improved bid looks to have paved the way for the UK confectionery business to be absorbed into Kraft's huge international portfolio of more than 60 chocolate, cheese, coffee, biscuits and general food brands.
While the main logic of the deal is in Kraft bolting on Cadbury's strong presence in growth markets, such as India and Latin America, the impact on Cadbury's home ground will be of intense interest to the UK marketing community and, given Kraft's increased negotiating muscle, food retailers.
The future of the two companies' UK marketing arrangements is likely to be decided by chief marketing officer Mary Beth West and the head of its European business Michael Clarke.
Kraft and Cadbury's UK marketing efforts are headed respectively by group marketing manager Victoria Milner and marketing director Phil Rumbol.
For agencies, combined annual spend of nearly £50m could be looking for a new home, with Cadbury having spent £24m in the first 11 months of 2009 and Kraft £22m, according to Nielsen.
Cadbury's media planning and buying account has been with PHD since August 2008. The agency which previously held the account, Starcom, holds the UK Kraft account, which was reported in July as being due for review late in 2009.
Media agencies used by Kraft elsewhere in the world include Carat and Mindshare.
In the creative arena, Cadbury has achieved marketing fame through a series of campaigns produced by Fallon including 'Gorilla' and 'Eyebrows' and also uses SSF group sister agency Saatchi & Saatchi.
Kraft uses a wider spread of agencies, including JWT for a recent Kenco campaign, Work Club for a digital campaign for Carte Noire, and DraftFCB on the introduction of Oreo cookies to the UK. Ogilvy has also produced work for its Tassimo coffee system and Toblerone.
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