Kraft Inc. has rejected an $11.8 billion cash takeover bid by Philip Morris Cos., calling the offer "inadequate" and announcing instead a dividend package for shareholders that would mark the largest restructuring in corporate history.

Kraft valued the new package, announced Sunday, at more than $110 a share, well above Philip Morris's $90-per-share offer, meaning the tobacco giant would have to substantially boost its offer if it hopes to acquire Kraft."Your board believes that we should take action to maximize shareholder value rather than accept an inadequate offer," John M. Richman, Kraft chairman and chief executive officer, wrote in a letter to stockholders.

Kraft, the nation's No. 1 food company, saw its stock soar more than $30 a share after Philip Morris made its offer last Monday. Kraft stock closed at $92 a share on the New York Stock Exchange Friday.