* FTSEurofirst 300 index up 1.4 percent
* Cadbury soars after Kraft bid approach, rejects offer
* Banks gain; ABF rises, Telefonica up
By Joanne Frearson
LONDON, Sept 7 (Reuters) - European shares mostly rose on Monday for the second consecutive session, with Cadbury soaring more than 40 percent following a $16.7 billion bid approach from North America's Kraft Foods.
By 1023 GMT the pan-European FTSEurofirst 300 index of top shares was up 1.4 percent at 975.46 points.
The index, which slumped 45 percent in 2008, is up 17 percent so far this year and has jumped 51 percent from a record low hit in early March.
"Positive sentiment from Friday's close on Wall Street and bid speculation on Cadbury are igniting things a little bit," said Philippe Gijsels, senior equity strategist at Fortis Banks.
"But volumes are low because Wall Street is closed for Labor Day. Tomorrow everyone will return and we will probably get a more realistic view on the market," he said.
Food producers added the most points to the index. Britain's Cadbury soared 41.2 percent after North American's biggest food group Kraft Foods said it had offered 300 pence in cash and 0.2589 new Kraft shares for each Cadbury share. But the world's second largest confectionery group said it had rejected the approach by Kraft, saying the proposal undervalued the group and its prospects. Kraft said it still hopes it can clinch a deal.
"The thinking is that the initial shot from Kraft is a bit too low based on some current valuations and previous deal multiples in the sector. The deal needs to be north of 800 pence," said Paul Chesterton, senior sales trader at CMC Markets.
ABF UPS EARNINGS FORECAST
Associated British Foods rose 4.3 percent after the food and retailing group nudged up its full-year earnings forecast on the back of strong results from its Primark discount clothing chain and its sugar business. The market also got support after the Group of 20 meeting in London of finance ministers and central bankers said in a closing statement that they would not remove economic stimulus until the global recovery was well entrenched.
Banks featured among heavyweight risers. UniCredit, UBS, Banco Santander and Lloyds Banking Group were up 0.6 to 2.1 percent.
Spain's Telefonica rose 2.3 percent after the telecoms company said on Sunday it had reached a deal with China Unicom whereby each would buy $1 billion worth of the other's shares as part of a strategic alliance. Across Europe, the FTSE 100 index, Germany's DAX and France's CAC 40 were all up 1.4 percent.
"We are quite optimistic for the short term because everything is there in order to manage the uptrend," said Romain Boscher, head of equity management at Groupama Asset Management.
"The market is talking a lot more about M&A stories this morning. This kind of newsflow coupled with a normalised valuation environment is what the market is waiting for in order to get more bullish," he added. (Additional reporting by Atul Prakash; Editing by Greg Mahlich)