Mall owner Mills agrees to $1.64-billion buyout

Struggling U.S. mall owner Mills Corp. has agreed to a sweetened buyout offer of $1.64 billion from Simon Property Group Inc. and Farallon Capital Management, giving Simon control of a slate of shopping centers in densely populated areas, the companies said Friday.

The Simon-Farallon group raised its offer to $25.25 a share from $24 after original Mills suitor Brookfield Asset Management Inc. raised its initial bid of $1.35 billion, or $21 a share, a few days ago, people familiar with the deal said.

In its original agreement with Mills, Brookfield was allowed to raise its offer within an allotted time, sources said. One said Brookfield’s second offer was higher than $24 a share but less than Simon’s improved bid.

“We believe that the Mills opera is at an end,” David Fick, an analyst at Baltimore-based Stifel Nicolaus & Co., wrote in a research note.

The deal also calls for the new buyers to assume $7.9 billion of Mills debt and preferred stock.

Chevy Chase, Md.-based Mills said its board unanimously approved the deal. However, directors affiliated with German property fund Kan Am, a major shareholder, abstained.

Mills also terminated its agreement with Toronto-based Brookfield, triggering a $40-million breakup payment to the Canadian firm.

Mills, whose 39 retail malls include two of Southern California’s largest shopping centers, Ontario Mills and Del Amo Fashion Center in Torrance, put itself on the block last year as it wrestled with cash flow problems arising from an accounting mess that led to firings, top management resignations and an investigation by the Securities and Exchange Commission.

“We ... have believed all along that Simon is the single logical buyer for Mills,” Fick wrote.

Indianapolis-based Simon, the largest U.S. mall owner, could boost the operating income of the Mills malls by 10% within the first year, Fick said.

Simon has no plans to change the names of any of the shopping centers but did not rule out the sale of a few, Chief Financial Officer Stephen Sterrett said.

Some Mills properties could be enhanced by Simon’s successful outlet centers, he said.

Others could become home to many of Simon’s retail tenants that Sterrett said had been lining up to expand their presence in the company’s portfolio of more than 285 U.S. centers.

Mills shares fell $1.22 to $25.48 on Friday.