Cadbury is to be taken over by the US food company Kraft after its board approved a new increased bid.

The Cadbury board will advise its shareholders to accept a new offer of 840 pence a share – valuing the company at £11.5bn ($18.9bn).

Cadbury shareholders will also receive a dividend of 10 pence a share, BBC business editor Robert Peston says.

Cadbury and Kraft said they were still finalising details of the agreement and would make a statement later.

The deal will bring to an end months of animosity between the two companies.

According to our business editor, the offer will consist of 500 pence in cash, with the rest made of Kraft shares. Kraft will borrow £7bn ($11.5bn) to finance the deal.

Hershey appears to have dropped out of the bidding race.

Cadbury Agree Takeover

Fierce defence

The deal is a significant increase on earlier Kraft bids, which were flatly rejected by the Cadbury board as “derisory”.

Kraft previously offered 761 pence per share, valuing the company at £10.5bn – a bid Cadbury’s chairman Roger Carr said was an attempt to “buy Cadbury on the cheap”.

Shareholders are now expected to agree to the takeover.

David Cumming, head of UK equities at Cadbury shareholder Standard Life, said that he would be agreeing despite hoping for a higher price.

“I won’t go against the view of Cadbury’s management,” he told the BBC.

“Kraft are getting a good deal. It’s sad that Cadbury is gone, but business is business.”

In early trading on Tuesday, Cadbury shares were up 3.5%.

The approach by Kraft last year led to protests from unions and workers, concerned that a takeover would be likely to lead to job losses among the 40,000 Cadbury staff employed worldwide.

Kraft is likely to commit to protecting jobs at the Somerdale and Bourneville sites in the UK, according to our business editor, though staff numbers at Cadbury’s head office in Uxbridge are expected to be cut.

The deal should also mean that a factory earmarked for closure at Keynsham, near Bristol, will be saved.