Mall firm Mills says it prefers new offer

Mall developer Mills Corp. said Tuesday that it now favored a $1.6-billion offer from Simon Property Group Inc. and hedge fund Farallon Capital Management -- a deal that tops an earlier takeover agreement that Mills made with Brookfield Asset Management Inc.

Chevy Chase, Md.-based Mills said its board of directors decided that the Simon-Farallon deal, at $24 a share, was superior to Brookfield’s proposed $21-a-share deal, valued at $1.35 billion. The board authorized Mills to end the Brookfield deal.

However, Mills said it would give Toronto-based Brookfield three days to top its previous offer before it broke the original agreement, signed Jan. 17. Mills said it was “ready and willing to negotiate such an amendment” with Brookfield.

Brookfield spokeswoman Katherine Vyse declined to comment Tuesday. In a conference call Friday to discuss Brookfield’s fourth-quarter results, Chief Executive Bruce Flatt said the firm would “consider our options” if Mills decided that the Simon-Farallon offer was better.

Along with the higher price, Mills said, its board preferred the Simon-Farallon deal because it could be closed more quickly than the Brookfield proposal. Ending the Brookfield agreement probably would result in Mills absorbing a $40-million breakup fee.

Shares of Mills rose 49 cents to $26.24.

Mills, which owns 38 shopping centers nationwide and was one of the first mega-mall developers, has struggled in the last year, saddled with accounting problems and heavy debt that the company warned in January could push it into filing for bankruptcy protection.

The Securities and Exchange Commission is investigating Mills’ accounting missteps, which the company said were widespread and could trim as much as $352 million from shareholder equity. Mills has yet to file its 2005 annual report and it plans to restate earnings as far back as 2001.

Executives of Indianapolis-based Simon said in a statement that they were pleased with the Mills decision.

“We spent a long time reviewing the assets and are comfortable with them and their value and what we can do with them,” a Simon spokeswoman said.