The US giant is expected to raise its offer for the Dairy Milk firm from 745p a share, valuing the company at £10.2 billion, to 800p a share, according to a Sunday newspaper.

It is also said to be in the final stages of putting a financing package together which would enable it to offer around half the sum in cash.

But Cadbury's shares closed at 800.5p on Friday, suggesting Kraft may have to offer more than 800p per share, with some analysts saying they may have to raise their bid to as much as 850p a share to be successful.

It is thought rivals Nestle or Hershey may also come forward and table a bid for the group.

It is understood that the Takeover Panel is this week preparing to set 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 50 billion US dollars (£30.5 billion), according to Kraft.

The US firm has also sought to give assurances that a deal between the two 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.

Meanwhile, it was reported that Cadbury is considering reducing the size of its chocolate bars to offset higher cocoa costs.

The company has already introduced smaller bar sizes abroad to keep prices below key levels which would deter buyers, according to another Sunday newspaper report.

It quoted the group's finance director Andrew Bonfield as saying: "In Australia, we've relaunched Cadbury's Dairy Milk in a new pack size.

"We were able to use price points and the promotional strategy as a way of actually realising higher prices without necessarily a headline price increase. These are the sorts of things we'll continue to look at as we go into 2010."

A Cadbury spokeswoman declined to comment on the report.