Harmony in too deep as legal costs on Gold Fields takeover spiral

Harmony, the South African company embroiled in a £3.5bn hostile takeover battle for mining rival Gold Fields, is facing major overruns on its shoestring legal and other advisory budgets.


Harmony, the South African company embroiled in a £3.5bn hostile takeover battle for mining rival Gold Fields, is facing major overruns on its shoestring legal and other advisory budgets.

When the company published its original offer document, it budgeted a flat fee of only R8.55m (£760,000) for legal advice.

Harmony chief executive Bernard Swanepoel, who is known for his cost-conscious approach, is using South African law firm Cliffe Dekker and US firm Hogan & Hartson.

However, when Gold Fields, advised by Linklaters and Skadden Arps Slate Meagher & Flom, decided to fight the bid in the US courts, Harmony drafted in Simpson Thacher & Bartlett, which is likely to increase its bill significantly.

On the investment banking side, Harmony is using HSBC and Investec, for which Harmony budgeted R50m (£4.5m) and R97.5m (£8.7m) respectively on advisory fees, contingent on 100 per cent acceptance by Gold Fields’ shareholders.

Since then it has also instructed Merrill Lynch and Morgan Stanley. Harmony’s PR advisers, Financial Dynamics, declined to comment on advisory costs.

Hogan partner David Wertheimer commented: “[Gold Fields] engaged in litigation without merit, and to that extent imposed on Harmony costs that were unwarranted.”

He added that the firm was still considering litigating over Gold Fields’ conduct.

Harmony must submit its response to Gold Fields’ claim by 29 December.