LONDON - US chocolate maker Hershey and Italian peer Ferrero said Wednesday they are considering a bid for British confectioner Cadbury, in a move which would whip up a takeover war with Kraft Foods.

The news could remould the chocolate sector with a takeover costing more than 10 billion pounds (11.2 billion euros, $16.8 billion).

Shares in Cadbury, already facing a hostile takeover offer from Kraft, rallied 1.21% to close at 797.50 pence, driven by the prospect of a bid battle. The London FTSE closed 0.07% lower at 5,372.1 points.

"Cadbury was up... as the prospect of a bidding-war loomed, with Hershey and Ferrero emerging as potential partners to see off Kraft Foods," said Anthony Grench from financial spread-betting company IG Index.

A company spokesman told AFP that it would only consider a takeover offer which delivered "full value" for Cadbury.

The Wall Street Journal, citing unnamed sources familiar with the matter, had reported Tuesday that Ferrero was in talks with Hershey over a potential joint bid.

The pair said in separate statements to the London Stock Exchange on Wednesday that they were considering their options.

"The Hershey Company notes the recent press speculation regarding a potential offer for Cadbury," Hershey said in a statement.

"Hershey confirms that it is reviewing its options and at this stage there can be no assurance that any proposal or offer from Hershey will be forthcoming. A further announcement will be made in due course if appropriate."

In a similar statement, Ferrero also said it was examining its options on Cadbury.

"Ferrero notes the recent press speculation regarding a potential offer for Cadbury. Ferrero confirms it is in the preliminary stages of evaluating its options in respect of Cadbury," Ferrero said.

"There can be no certainty that any proposal relating to Cadbury will ultimately be forthcoming."

Ferrero is a privately-held company that makes Ferrero Rocher chocolates, Kinder Surprise eggs, Nutella spread and Tic Tacs.

Pennsylvania-based Hershey already has a relationship with Cadbury and holds a licence to produce its Dairy Milk chocolate bars and Cadbury Creme Eggs in the United States.

The Wall Street Journal had also reported on Tuesday that talks between executives at Hershey and Ferrero had not yet produced an offer.

The discussions, in preliminary stages, were being held up by a dispute on Cadbury's higher-margin gum and candy businesses, according to the daily US newspaper.

The report said Hershey had been eyeing Cadbury but lacks the financial resources on its own to top Kraft's offer.

Last week, Kraft launched a formal hostile 9.8-billion-pound bid for Cadbury.

A combination of Kraft and Cadbury would bring together leading Kraft brands Oreo biscuits and Maxwell House coffee with Cadbury's big sellers such as Dairy Milk and Trident chewing gum.

However, London-listed Cadbury has repeatedly rejected Kraft's offer, labelling it "derisory".

"We are focused on delivering value to shareholders as a standalone pure-play confectioner," a Cadbury spokesman told AFP on Wednesday.

"However, we have always said that we would give proper consideration to any serious offer that delivers full value for the company.

"Unless and until we find ourselves in that situation we have nothing to comment upon."

In opening US trade on Wednesday, Kraft Foods shares dropped 0.65% to $27.46 on hints of a bidding war developing for Cadbury. Hershey shares were down 0.37% at $37.96.