Rumours flooded the Paris stock exchange earlier this week sparking investor interest in Danone's stock, causing it to rise in value by 3.7 per cent.
The rumours follow speculation that Kraft's parent company, food and tobacco group Altria, is preparing to split into three separate units following a fall in the company's stocks due to tobacco litigation in the US.
However, some analysts argue that if the split goes ahead, it would be too soon for Kraft to undertake such a massive acquisition of the French bottled water, yoghurt and biscuits group.
Earlier this year US-based Pepsico was also rumoured to be exploring the possibilities of a Danone takeover - this suggestion saw its stocks increase by 20 per cent.
Any hopes of a bid from the snack food and soft drinks food giant were dashed as Danone's management, the French government and trade unions vowed to fight any moves to take Danone away from France.
Groupe Danone is the world's largest dairy products maker and the second largest bottled water producer.
Kraft Foods, is the largest branded food and beverage company in the US, and the second largest in the world. It operates in more than 155 countries worldwide with annual sales of €28billion (£20bn).
So far both Kraft and Danone have refused to confirm or deny the rumours about the takeover.