The likelihood of a bidding war for British candy maker Cadbury PLC receded on Tuesday after Switzerland's Nestle SA ruled itself out as a suitor–and instead gave Kraft Foods Inc. a bundle of cash to sweeten its own hostile offer.

Kraft said it will increase the proportion of cash in its existing £10.3 billion (US$16.5 billion) offer for Cadbury after agreeing to sell its lucrative North American pizza business to Nestle for $3.7 billion. Among the brands that Nestle will acquire is Delissio pizza.

Rumours that Nestle was gathering a war chest for a rival bid were rife on Monday after the maker of Nescafe coffee and Kit Kat chocolate agreed to sell off its 52% stake in eyecare company Alcon for US$28 billion and announced it would spend less cash on share buybacks.

But Tuesday's announcements leave Kraft as the only declared bidder for Cadbury, though the British maker of Dairy Milk chocolate and Dentyne gum has said it has received expressions of interest from The Hershey Co. of the United States and Italy's Ferrero International SA.

"Today's news does... remove some of the uncertainty surrounding exactly who might be bidding for Cadbury," said Jeremy Batstone-Carr, an analyst at Charles Stanley&Co.

"Whilst we imagine that vague speculation will continue regarding Hershey's apparent interest in making a counterbid for Cadbury largely, in our view... Nestle's decision effectively leaves Kraft as the overwhelming front-runner." Cadbury shares, which have surged in recent weeks on speculation of a bidding war, dropped back to 790 pence on the London Stock Exchange.

That is still well above the original 742 pence value of Kraft's offer–300 pence in cash and 0.2589 Kraft shares for each Cadbury share–and changing the cash component is unlikely to be enough to win over shareholders who are seeking a higher overall price.

Cadbury said the offer continued to undervalue the British company.

"Kraft has once again missed the point," it said. "Despite this tinkering, the Kraft offer remains unchanged and derisory with less than half the consideration in cash."

Kraft has until Jan. 19 to revise its offer.

However, some analysts still believe that another suitor may emerge.

"We think that Hershey is keen to make a deal with Cadbury," analysts at Numis stockbrokers wrote in a research note. "In reality Nestle is acting as a fund provider to the Cadbury deal and we would not be surprised to see the Swiss group play that role again by buying assets from Hershey, the Kit Kat brand in the U.S. being an obvious candidate."

Nestle is gaining a pizza business that includes the Tombstone and Jack's brands in the U.S., the Delissio brand in Canada and the California Pizza Kitchen trademark license.

Nestle said the acquisition will add a "new strategic pillar" to its frozen food portfolio in the U.S. and Canada, making it a significant player in the $37 billion a year pizza market. Nestle is already represented in the U.S. with brands such as Stouffer's, Lean Cuisine, Buitoni, Hot Pockets and Lean Pockets.