Simon Property Group Inc. and Farallon Capital Management LLC made an unsolicited $1.56 billion offer for Colorado Mills owner Mills Corp., outbidding Brookfield Asset Management Inc.
Simon, the largest U.S. mall developer and owner of the Town Center at Aurora, and Farallon, a $26 billion hedge fund, bid $24 a share for Chevy Chase, Maryland-based Mills, the companies said today in a statement. Farallon, Mills’s largest shareholder, has been seeking a higher offer since Brookfield bid $21 a share last month.
Mills, owner of the Galleria at White Plains, New York, the Del Amo Fashion Center in Los Angeles and 36 regional malls, scrapped plans to expand and disclosed an accounting investigation, sending the shares down 45 percent in the past year. Simon and Farallon said they will each contribute $650 million in equity to finance the offer.
“This is what we’ve been waiting for,” said Rich Moore, an analyst for RBC Capital Markets in Columbus, Ohio. “It was baffling to me that in this environment where there aren’t any malls for sale, how Simon could be passing up an opportunity to bid on 40 of them. The king has arrived on the scene and put his bid in and all is right with the world.” Moore rates Mills shares “buy” and Simon “top pick.”
The value of the transaction is based on 65 million shares outstanding, including common shares and operating units held by limited partners. The transaction includes $3.5 billion in secured debt, mostly mortgages on malls, $1 billion in preferred stock and a $1 billion loan from Goldman Sachs & Co., the companies said.
Shares of Mills jumped $3.35, or 15 percent, $25.50 at 11:10 a.m. in New York Stock Exchange composite trading. Indianapolis-based Simon, the biggest real estate investment trust by market value, rose 83 cents to $115.79.
The Mills board will “promptly consider” the new bid, Mills said in a statement.
