In a joint statement, the companies said,"The boards of Kraft Foods Inc. and Cadbury plc confirm that they are finalising the terms of a recommended offer for Cadbury plc. A further announcement will be made shortly."
According to reports, Cadbury's decision is believed to have come after Kraft's raised its offer from 10.5 billion pounds to about 11.7 billion pounds.
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."
Cadbury is the world's second biggest confectionery company. Its leading brands include Dairy Milk chocolate and Trident chewing gum.
Kraft, the world's second biggest snacks group after Nestle, makes numerous well-known products including Dairylea cheese, Milka and Toblerone chocolate and Oreo cookies.