Wednesday, January 17, 2007

1:57 p.m.

Embattled local mall developer Mills Corp. agreed today to be bought by a Canadian investment company.

Brookfield Asset Management plans to buy the Chevy Chase developer for $1.35 billion, beating out at least two other firms.

Mills owns Lakeforest Mall in Gaithersburg; Potomac Mills and Potomac Town Center in Prince William County; Marley Station in Glen Burnie, Md.; and Arundel Mills in Hanover, Md. It owns 38 shopping centers nationwide.

“We believe the transaction with Brookfield not only provides certain value to the Mills’ stockholders, but also affords them the opportunity to participate in the upside potential created by this transaction,” said Mark Ordan, chief executive officer and president of Mills Corp.

Brookfield plans to pay $21 per share, 15 percent more than yesterday’s closing price of $17.77. The news sent Mills’ stock up 18 percent to $21.01 in midday trading on the New York Stock Exchange.

Mills would become a publicly traded entity of Brookfield.

“We are pleased to be able to work with the Mills Corp. to move beyond the recent issues it had encountered,” said Bruce Flatt, managing partner and chief executive officer of Brookfield.

Earlier this month, Mills reported that its executives may have engaged in misconduct, creating four years’ worth of earnings restatements, according to a filing with the U.S. Securities and Exchange Commission (SEC). It also warned that unless it could negotiate a loan extension, it would run out of money on March 31. Its loan was $1.1 billion, slightly less than the Brookfield purchase offer.

The SEC also is investigating the company.

Two major shareholders yesterday submitted proposals to invest hundreds of millions of dollars in the company. The investors, the hedge fund Farallon Capital Management and the Israeli firm Gazit-Globe, said they feared Mills would sell itself at a low price out of desperation.

Mills’ board of directors approved the deal with Brookfield, but stockholders still need to approve it. It is expected to close during the second half of this year.

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