Mills 'Opera' Ends With Bid From Mall Owner, Hedge Fund

Mills Corp. of Chevy Chase, the owner of 38 shopping malls, agreed yesterday to be acquired for $7.9 billion by Simon Property Group and Farallon Capital Management, rejecting an offer from Brookfield Asset Management.

Mills shares fell 4.6 percent as the prospect of another bid faded. Simon and Farallon would pay $25.25 a share in cash, or $7.9 billion including debt and preferred stock, higher than an earlier offer of $24 a share, the companies said in a statement. Mills terminated a previous agreement of $21 a share with Brookfield, a Canadian conglomerate.

"The Mills opera is at an end," David Fick, an analyst at the brokerage firm Stifel Nicolaus of St. Louis, said in a note to investors. "We do not expect Brookfield or others to make additional offers." Fick gave Mills shares a rating of "hold."

Mills, with regional holdings that include Potomac Mills and Arundel Mills shopping malls, has lost more than a third of its market value in the past 12 months. The company ran out of money for its biggest project, the 104-acre Meadowlands Xanadu shopping and entertainment complex in northern New Jersey, and it is the subject of a Securities and Exchange Commission accounting probe. Mills has sold properties, including Xanadu, to pay down debt.

The acquisition allows Indianapolis-based Simon, whose 280 properties make it the largest shopping mall owner in the United States, to add holdings that include the Del Amo Fashion Center in Torrance, Calif. Farallon, a $26 billion hedge fund in San Francisco, expands its real estate portfolio after becoming Mills' biggest investor.

Shares of Mills fell $1.22, to $25.48, on the New York Stock Exchange. Simon fell 16 cents, to $118.24. Toronto-based Brookfield added 55 cents to close at $54.40.

The agreement follows a month-long bidding contest by Brookfield and the Simon-Farallon group. Brookfield offered $1.35 billion last month and Simon and Farallon followed last week with an unsolicited $24 a share bid.

A tender offer for Mills shares is to start before the end of the month, Simon and Farallon said in the statement.

Spokesmen for Simon-Farallon and Brookfield declined to comment.

Mills may not have to file financial records with regulators because of the tender offer, making it difficult for investors to judge the value of the company, said Rich Moore, an analyst with RBC Capital Markets in Cleveland. Mills has not filed financial statements since September 2005, he said.

A message left with Mills spokesman Ken Volk seeking a comment was not immediately returned.

If Mills sells to anyone but Brookfield, it will owe Brookfield a termination fee of $65 million. On March 1, that fee rises to $90 million, and on April 15, it rises to $120 million, according to regulatory filings. If Mills breaks its agreement with Simon and Farallon, it would have to pay them $40 million.