Nov. 22 (Bloomberg) -- Nestlé SA is weighing options including a possible bid for Cadbury Plc that would challenge Kraft Foods Inc.’s offer and a potential move by Hershey Co., according to two people with knowledge of the matter.

Nestle is reviewing its options with bankers and may decide against a bid, said the people, who asked not to be identified because the talks are private. Hershey and Ferrero SpA said in statements last week that they were also evaluating options. Ferrero, the maker of Nutella, is unlikely to proceed with an offer, said three people briefed on the situation.

Kraft’s unsolicited 10.4 billion pound ($17 billion) bid for Cadbury would create the largest maker of candy, threatening Nestle’s and Hershey’s market positions. Any bid by Nestle or Hershey may be countered with a higher offer from Kraft, which has never said its current cash-and-stock proposal is final. Nestle may also be constrained by antitrust concerns, as a combination with Cadbury would dominate some chocolate markets.

“How much do they want it?” said Jon Cox, an analyst at Kepler Capital Markets in Zurich, who recommends buying Nestle stock. “If they wanted it, they’d have it, it’s a bit of a slam dunk. Nestle has the financial resources.”

He said there has been speculation Hershey would be Nestle’s partner if needed given the “crown jewel” U.K. Cadbury business would give Nestle almost half of the market, potentially attracting the attention of regulators.

“Nestle would face a host of market competition authority difficulty with chocolate,” said Thomas Russo, a partner at Lancaster, Pennsylvania-based Gardner Russo & Gardner, which holds Nestle, Cadbury and Kraft shares. “Gum itself may be an additive without any competition authority problems for Nestle because they are not in gum,” he said earlier this month. Chewing gum accounts for 35 percent of Cadbury’s revenue.

In one possible scenario, Hershey would contribute at least $10 billion in cash and $2 billion in new shares, the Journal reported. Former Goldman Sachs Group Inc. banker Byron Trott is talking to investors about supplying an additional $3 billion to $5 billion in cash to help with the purchase, the newspaper said. The trust would sell assets, though it would try to maintain control of Hershey, the Journal said.

Nestle has an option to sell its majority stake in eye-care company Alcon Inc. to Novartis AG as early as January, and could use the proceeds, which may total more than $20 billion, to make acquisitions.

source: Bloomberg