Bankers cash in from guiding Kraft-Cadbury merger

(Reuters) — At least seven banks will split an estimated fee pot of around $100 million for advising on Kraft Food Inc.'s takeover of Cadbury Plc, giving merger bankers their first big pay day of 2010 as they look forward to an increase in deal activity.

However, Bank of America and J.P. Morgan Chase & Co. will share a paltry $1 million retainer as backers of a rival Hershey Co. bid that looks ever less likely to emerge.

Advisory fees typically account for a higher percentage of deal value in smaller or mid-market transactions. With deals over $10 billion, such as Kraft's $19.6 billion purchase of Cadbury, the percentage is generally as low as 0.1 to 0.3 per cent of deal value.

Kraft agreed on Tuesday to buy Cadbury after a four-month battle between the U.S. food group and the British confectioner, effectively outbidding Hershey, which has until Jan. 25 to make an offer.

Cadbury's advisers Goldman Sachs, Morgan Stanley and UBS will share between $50 million and $56 million, according to estimates from Thomson Reuters and U.S. consulting firm Freeman & Co.

Kraft's core advisory team of Lazard, Centerview, Citigroup and Deutsche Bank are set to share between $53 million and $58 million. A key figure on the Lazard team was banker Peter Kiernan, who is set to become director general of Britain's Takeover Panel from March 1.

A team of nine banks will also get a portion of an extra fee of between $26 million and $32 million for financing Kraft's $9 billion dollar bridge loan, although it is unclear if any more of these lenders have been given advisory status.

JP Morgan and Bank of America would have shared in a fee pot of a similar size, Freeman said, if Hershey had managed to clinch a deal with the British chocolatier. The U.S. chocolate company's wider advisory team included Warren Buffett's chosen banker Byron Trott.

Hershey had been preparing a bid for Cadbury to top Kraft, but "won't compete at this price level", a source familiar with the matter said on Monday, as talk swirled of a higher offer from Kraft.